US Stocks Advance as CPI Report Buoys Trader Bets on Rate Cuts
US stocks climbed on Thursday, posting fresh records amid hopes that an in-line inflation report will push the Federal Reserve to cut interest rates next week.
The S&P 500 Index closed 0.8% higher, led by materials and healthcare companies. The gauge posted its fourth day of gains, the longest winning streak since July. The blue-chip Dow Jones Industrial Average advanced 1.4%, led by gains in 3M Co. and Sherwin-Williams Co. The tech-heavy Nasdaq 100 Index rose 0.6%.
The core consumer price index, excluding the often volatile food and energy categories, increased 0.3% from July, according to Bureau of Labor Statistics data out Thursday. When incorporating those components, the overall CPI rose 0.4%, the most since the start of the year.
“While today’s inflation numbers remain above the Fed’s stated 2% target, the data is not as concerning for the Fed as the rapidly weakening employment data from the last couple of months, paving the way for a rate cut at their meeting next week,” Dominic Pappalardo, chief multi-asset strategist at Morningstar Wealth, said in a note to clients.
“These numbers are very close to in line with what we thought the big surprises were,” David Kelly, chief global strategist at JPMorgan Asset Management, said in a Bloomberg TV interview after the release. “Everyone should sort of take a deep breath and not over-react,” he said.
Separately, applications for US unemployment benefits jumped last week to the highest level in almost four years, indicating layoff activity may be on the rise amid a sharp slowdown in hiring. Initial claims rose by 27,000 to 263,000 in the week ended Sept. 6, the highest since October 2021, according to Labor Department data released Thursday.
Strategists believe that a Fed rate cut next week is a certainty given the weakening US labor market.
“The Fed has been explicit that cuts are to reduce risks to the labor market,” said Dennis DeBusschere, president and chief market strategist at 22V Research LLC, in a note to clients.
Traders expect stocks to brush off weaker jobs data to end the year higher, the latest Markets Pulse survey showed. Investors remain optimistic even as the 14-day relative strength index is flashing warning signs within the S&P 500. At the same time, high-flying technology stocks are doing so well that some investors are bidding up put options to protect the year’s gains.
In other news, Centene Corp. advanced 9% after the health-insurer reaffirmed its full-year guidance. Warner Bros. Discovery Inc. gained 29% after people familiar with the matter said that Paramount Skydance Corp. is preparing a bid for the firm.
Elsewhere, the European Central Bank held rates steady and cut its inflation outlook for 2027, while leaving its forecasts for 2025 and 2026 intact.
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