Wall Street’s major market averages moved higher Thursday afternoon, driving to push past choppiness that followed wholesale prices rising above expectations and weekly jobless claims edging up.
The S&P 500 (SP500) +0.4%, looking at a fourth consecutive gain. The Nasdaq Composite (COMP:IND) +0.8%, and the Dow (DJI) +0.3%, sloughing off an earlier loss. The key indexes had been mixed after the release of the Producer Price Index report and data showing initial jobless claims edging higher to 230K.
Core PPI, which excludes volatile food and energy prices, advanced 0.3% vs. 0.2% consensus. The PPI data followed Wednesday’s CPI report in which core prices rose more than anticipated. The CPI data drove down the odds of a large interest rate cut of 50 basis points by the Federal Reserve next week.
The “in-line weekly jobless claims and broadly in-line PPI #inflation numbers (the exception being a slightly hotter monthly core measure) make what was already an unlikely possibility of a 50 bps Fed rate cut next week even more unlikely,” Mohamed El-Erian, economic advisor to Allianz SE, PIMCO’s parent company, said in a post on X (formerly Twitter).
Fed funds futures showed an 81% probability of the Fed cutting rates by 25 bp next week.
In the bond market, the 10-year Treasury yield (US10Y) was up 4 basis points to 3.70%. The 2-year yield (US2Y) was up 3 basis points to 3.68%.
The 30-year yield (US30Y) was up 2 basis points at 3.99%, slipping 1 basis point after the Treasury Department auctioned $22B of 30-year bonds at a high yield of 4.015% vs. 4.314% in last month’s auction. The bid-to-cover ratio was 2.38 vs. 2.31.
Among equities, nine of the 11 S&P 500 (SP500) sectors rose, topped by the Communication Services and Energy groups. Real Estate was down. Market heavyweight Nvidia (NVDA) +2%, on track for a fourth straight gain. But chipmaker Micron (MU) -3.5% following a double downgrade and price-target cuts from analysts stemming from a temporary slowdown in non-high-bandwidth memory markets.
Major U.S. equity averages finished Wednesday’s volatile session higher, as investors seemingly set aside reduced odds of a 50bp rate cut at the Fed’s Sept. 17-18 meeting.
The European Central Bank on Thursday cut its key deposit rate by 25bp to 3.5%, saying inflation should decline after an expected pickup in late 2024. But policymakers led by Christine Lagarde flagged slowing economic growth in lowering their 2024 GDP projection to 0.8% from 0.9%, and clipping outlooks for 2025 and 2026.
The S&P 500 (SP500) on Wednesday ended up 1.1% after losing as much as 1.6%. That session marked the first time since Oct. 13, 2022, when the benchmark finished up over 1% after trading down over 1%, Bespoke Investment Group said in a blog post Thursday. “For you market historians, 10/13/22 was the day after the 2022 bear market closing low.”
The CPI data suggested the Federal Reserve should be cutting at every meeting to catch up with inflation, but quarter-point cuts will suffice, UBS’ Paul Donovan said.
Among Thursday’s individual movers, Moderna (MRNA) -13% after the vaccine maker outlined plans to cut its annual R&D expense by $1.1B starting in 2027.
Warner Bros. Discovery (WBD) +6.6 after renewing a multi-year distribution partnership with Charter Communications (CHTR) to fully integrate linear video and streaming services. Charter shares (CHTR) were +3.1%.
