Wall Street’s major indexes extended their gains, with the tech Nasdaq gaining more than 2% on positive sentiment, framed by encouraging earlier-released producer prices data that showed inflationary pressures continued to ease.
In particular, data released today by the US Labor Department showed that producer prices rose just 0.1% in July, compared with analysts who had expected a 0.2% rise in July, according to a Reuters poll.
On a year-over-year basis, prices rose 2.2% in June, beating estimates for a 2.3% rise after rising 2.7%.
Excluding volatile food and energy categories, the core producer price index was flat against analysts’ estimates of a 0.2% rise on a monthly basis. The annual index was 2.4%, while analysts had put it at 2.7%.
The data is expected to keep the US Federal Reserve on track to cut interest rates in September, the highest level in more than 20 years, from 5.25% to 5.50%. The central bank has kept interest rates there until July 2023. Markets now see a more than 50% chance of a 50 basis point rate cut, according to CME’s FedWatch tool.
In total, markets expect interest rates to be cut by 100 basis points by the end of 2024.
Indicators – statistics
On the board, the Dow Jones industrial average rose 314.94 points, or 0.81%, to 39,677.65, while the broader S&P 500 added 78.17 points, or 1.46%, to 5,422.72. The tech Nasdaq gained 384.70 points, or 2.29%, to 17,167.44.
Of the 30 stocks that make up the Dow Jones Industrial Average, 25 move with a positive sign and only five move with a negative. Top gainers Nike rose $4.07, or 5.46%, to $78.71, Intel added 4.78% to $20.29, and Boeing rose 1.88% to $167.22.
In contrast, Johnson & Johnson (-1.38%), Walmart (-1.33%) and Chevron (-0.77%) suffered the biggest losses.
Despite encouraging data on producer prices, Atlanta Federal Reserve President Rafael Bostic said today that he wants to see “a little more evidence” before he’s ready to support a rate cut.
Speaking at an event in Atlanta, Bostick said he wants to be sure the Fed avoids cutting interest rates too quickly if inflation starts to pick up again.
If the economy continues to grow as expected, interest rates will remain low by the end of the year, he said. “I’m ready to wait… but it’s coming… it’s coming,” the official said.
Investors now await data due Wednesday on the path of the U.S. consumer price index for July, with analysts expecting a small monthly increase of 0.2%. Retail sales data will follow on Thursday.
In business development, Starbucks shares jumped 21% after announcing the appointment of Brian Nichol as the company’s CEO.
Meanwhile, BuzzFeed is surging 12.5% after the digital media company said second-quarter losses narrowed to $6.6 million from $22.5 million a year ago.
As for earnings, Home Depot announced today that it expects a decline in annual revenue and a larger decline in annual comparable sales.