Stocks hit record highs after inflation and jobless claims fuel expectations for a Fed rate cut
A surge in North American stock markets on Thursday signalled growing confidence that the US Federal Reserve is poised to cut interest rates next week, a move widely anticipated by investors seeking clarity on the path forward for rates and economic growth, according to CNBC.
The Dow Jones Industrial Average soared 617.08 points, or 1.36 percent, to close at 46,108.00, while the S&P 500 rose 0.85 percent to 6,587.47 and the Nasdaq Composite advanced 0.72 percent to 22,043.07.
All three indices set new intraday and closing records, as reported by both outlets.
Canada’s S&P/TSX composite index also reached new ground, gaining 228.50 points to 29,407.89, supported by strength in industrial stocks.
Market optimism followed a series of economic data releases.
The US consumer price index for August rose 0.4 percent month-over-month, slightly above expectations, while the annual rate matched forecasts at 2.9 percent.
The core CPI, which excludes food and energy, increased 0.3 percent in August and 3.1 percent year-over-year, both in line with projections, according to CNBC.
Meanwhile, the producer price index unexpectedly declined 0.1 percent on the month.
Labour market signals added to the narrative, with weekly jobless claims in the US rising by 27,000 to 263,000—the highest since October 2021—surpassing estimates and reinforcing the view that the job market is softening.
As per BNN Bloomberg, “the job market has to be weak enough to get the Fed to cut interest rates, which can give a kickstart to the economy and to prices for investments, but not so much that it causes a recession.”
The bond market responded with the yield on the 10-year US Treasury falling to 4 percent.
According to CNBC, the CME FedWatch tool showed near certainty that the Federal Reserve will cut its benchmark rate by a quarter percentage point at its September 17 meeting, with some market participants also considering the possibility of a half-point cut.
Sector performance reflected expectations for lower rates, with banks, consumer companies, real estate, and homebuilders all advancing.
Notable movers included Builders FirstSource, Centene, Opendoor Technologies, and Warner Bros. Discovery, as reported by BNN Bloomberg.
In Canada, the loonie traded at 72.23 cents US, up slightly from the previous day.
Internationally, European and Asian markets also posted gains, with the European Central Bank leaving rates unchanged and Shanghai’s index up 1.7 percent. In commodities, crude oil and gold both declined on the day.
