Overview:
Wall Street’s main indexes closed higher on Thursday, driven by key inflation data that confirmed the Federal Reserve is likely to opt for a 25-basis point interest rate cut at its next meeting. The S&P 500 rose 0.75% to 5,595.76, the Dow Jones Industrial Average added 0.58% to 41,096.77, and the Nasdaq Composite gained 1.00% to 17,569.68. The Russell 2000, representing small-cap stocks, outperformed with a 1.2% increase.
The Producer Price Index (PPI) for August climbed 0.2%, slightly above the 0.1% estimate, signaling steady inflation. Core PPI, which excludes food and energy prices, rose 0.3%, surpassing the expected 0.2% gain. The data reinforces expectations that the Federal Reserve will cut rates by 25 basis points during its September 17-18 meeting, marking the first cut since March 2020.
Small-cap stocks saw significant gains as bargain hunters returned to the market. Companies like Warner Bros Discovery and Charter Communications announced partnerships, boosting confidence in the communication services sector.
Fear & Greed Index:
Neutral – Investor sentiment remained cautious but optimistic, with expectations for the Fed to deliver a smaller rate cut of 25 basis points.
Key Indices (Closed Prices):
- S&P 500: +0.75% at 5,595.76
- Dow Jones Industrial Average: +0.58% at 41,096.77
- Nasdaq Composite: +1.00% at 17,569.68
- Russell 2000: +1.20%
Sector Performance:
- Winners:
- Communication Services: Led gains with a 2% rise, boosted by Warner Bros Discovery and Charter Communications’ announcement of an ad-supported version of streaming services.
- Gold Miners: The Arca Gold BUGS Index rose 5.8% as gold prices hit record highs.
- Kroger (KR): Shares surged 7.2% after beating second-quarter earnings estimates and raising sales forecasts.
- Losers:
- Moderna (MRNA): Plunged 12.4%, the steepest fall in the S&P 500, after forecasting revenue below analyst expectations.
Key Movers:
- Warner Bros Discovery (WBD): Jumped 10.4% after announcing a streaming partnership with Charter Communications (CHTR).
- Charter Communications: Rose 3.6% following the deal.
- Kroger (KR): Shares rallied 7.2% after beating second-quarter earnings estimates and raising the lower end of its full-year sales forecast.
- Moderna (MRNA): Plummeted 12.4% due to a weaker revenue forecast for 2025.
Economic Data:
- PPI (Producer Price Index): Rose 0.2% in August, higher than the 0.1% forecast, while core PPI increased by 0.3%, exceeding expectations.
- Jobless Claims: Initial claims for state unemployment benefits stood at 230,000 for the week ending September 7, in line with estimates.
Outlook:
The stronger-than-expected PPI and core PPI readings indicate that inflation pressures persist, but they are unlikely to prompt the Federal Reserve to deliver a larger 50-basis point rate cut. Most analysts are now pricing in a 69% chance of a 25-basis point cut, marking the first rate reduction since March 2020. While growth stocks such as technology and communication services led the rebound, concerns linger over Moderna’s forecast, and market participants are closely watching for corporate earnings and inflation reports throughout the week.
Investors are cautiously optimistic as the latest economic data supports the case for a “soft landing” scenario, with slower inflation allowing the Fed to ease off aggressive rate hikes. Small-cap stocks, in particular, are expected to benefit from falling rates, with sectors like communication services and retail expected to perform well. However, volatility may persist as corporate earnings and macroeconomic trends continue to influence market sentiment.
