On Thursday, the primary indexes of Wall Street experienced an upswing after producer prices data exceeded expectations, bolstering predictions for a 25-basis point rate cut by the Federal Reserve, while Moderna’s shares tumbled due to a pessimistic revenue outlook.
In August, the producer price index (PPI) for final demand increased by 0.2%, outpacing forecasts of a 0.1% rise. The core figure, excluding fluctuating food and energy prices, climbed 0.3%, surpassing the 0.2% prediction.
In another report, initial claims for state unemployment benefits reached 230,000 for the week ending Sept. 7, aligning with expectations.
“The data this week strongly indicates we’re likely avoiding a hard landing and are instead experiencing a soft landing. Both consumer and producer prices showed a decline in inflation,” remarked Peter Tuz, president of Chase Investment Counsel based in Charlottesville, Virginia.
“As long as investors perceive the prospect of an interest rate cut and a pathway for forthcoming reductions, they’re enthusiastic about opportunities in the stock market, particularly in the more growth-oriented segments,”
“While rate cuts are anticipated to reduce net interest income (NII)… lower rates are also expected to enhance spending. A conflict has begun to determine if growth can mitigate NII compression.”
Bank of America, Citigroup, and Wells Fargo experienced declines between 1.3% and 2%. Morgan Stanley fell by 0.5%, whereas JPMorgan Chase remained relatively unchanged.
These remarks overshadowed concessions by the Federal Reserve, which indicated intentions to ease a contentious plan to increase capital requirements for large banks.
Recent weeks of weakening employment and economic growth data had sparked speculation regarding a significant 50-bps interest rate cut by the Fed, though these anticipations diminished following Wednesday’s inflation data release.
On Thursday, while predictions fluctuated, traders still estimated a 69% likelihood that the U.S. central bank will cut rates by just 25 bps during its meeting on Sept. 17-18, as shown by CME’s FedWatch Tool. This would mark the first rate cut since March 2020.
According to preliminary figures, the S&P 500 added 42.70 points, or 0.77%, closing at 5,596.83 points, while the Nasdaq Composite climbed 175.63 points, or 1.01%, to finish at 17,571.16. The Dow Jones Industrial Average gained 243.64 points, or 0.60%, reaching 41,105.35.
The small-cap Russell 2000, which is more sensitive to economic changes, showed strong performance throughout the session.
“There’s likely some opportunistic buying happening. Small caps have underperformed this year and tend to respond to rate changes, so if rates decline, it could have a positive effect,” said Chuck Carlson, CEO of Horizon Investment Services in Hammond, Indiana.
Meanwhile, Moderna’s stock dropped after the vaccine producer projected sales between $2.5 billion and $3.5 billion for the next year, falling short of analysts’ expectations.
Kroger’s shares surged after the supermarket company exceeded second-quarter forecasts and raised the lower limit of its annual sales predictions.
Shares of Warner Bros Discovery and Charter Communications rose following the announcement that Charter would offer an ad-supported variant of Warner’s streaming platforms Max and Discovery+.
Gold mining stocks soared as spot gold reached an all-time high, leading to an increase in the Arca Gold BUGS index.
