Stocks rose on Thursday as traders anticipated that the latest reading of a key consumer inflation gauge won't stand in the way of the Federal Reserve lowering its benchmark interest rate next week.
The Dow Jones Industrial Average finished up 617.08 points, or 1.36%, at 46,108.00, while the S&P 500 ended up 0.85% at 6,587.47. The Nasdaq Composite advanced 0.72% to 22,043.07. All three major averages scored new intraday all-time highs in the trading day and closed at record levels.
It was a confusing batch of numbers, with the consumer price index reading for August coming in hotter than expected on a monthly basis but in line with expectations on an annual basis.
The CPI reading showed an increase of 0.4% for the month, according to the Bureau of Labor Statistics, higher than the 0.3% that economists polled by Dow Jones were expecting. However, the index recorded 2.9% on a 12-month basis, as expected. Additionally, the so-called core CPI, which excludes volatile food and energy, increased 0.3% in August and 3.1% from a year ago. Both were in line with the Dow Jones forecasts.
The report also comes a day after the producer price index showed an unexpected decline of 0.1% on the month.
Meanwhile, the labor market received yet another sign that it's slowing, as weekly jobless claims saw a surprise jump Thursday after job growth figures were revised down earlier this week. Workers filing for unemployment compensation for the week ended Sept. 6 increased 27,000 from the previous period to a seasonally adjusted 263,000, the highest level since October 2021. That's more than the 235,000 estimate that was penciled in.
Treasury yields fell Thursday in the wake of the data releases, with the yield on the benchmark 10-year Treasury dropping to 4%.
With growing evidence of softening U.S. economic growth, markets are pricing in a quarter percentage point at the conclusion of Fed's Sept. 17 meeting with near certainty, according to the CME FedWatch tool. Odds that the central bank will cut by a half percentage point also initially ticked higher.
"A quarter-point cut is a layup and the number still keeps a half-point cut on the table, especially when looking at the jobless data," said Jay Woods, chief market strategist at Freedom Capital Markets. "The bottom line is watch the 10-year Treasury yield. If we see a 3-handle on the 10-year, then the market could rally here."
Thursday's gain was broader than recent sessions, with banks like JPMorgan and consumer names like Walmart in the green on expectations for lower rates.
