By Sinead Carew and Shashwat Chauhan
(Reuters) – Wall Street’s main indexes closed higher on Thursday after the latest inflation data boosted expectations for a 25 basis point interest rate cut by the U.S. Federal Reserve, while accident (NASDAQ:) Weak revenue expectations made it the biggest percentage loser.
The producer price index for final demand rose 0.2% in August, compared with expectations for a 0.1% increase. The core figure, which excludes volatile food and energy prices, rose 0.3%, above expectations for a 0.2% increase.
Separately, initial claims for state unemployment benefits came in at 230,000 for the week ended Sept. 7, in line with estimates.
“This week’s data pretty much confirms that we’re unlikely to see a hard landing and that we’re in a soft landing,” said Peter Toews, president of Chase Investment Counsel in Charlottesville, Virginia.
“As long as investors see interest rate cuts and the future path of interest rate cuts, they are excited about the prospects of the stock market, especially the higher growth segments.”
A string of weak employment and economic growth data in recent weeks had fueled some bets on a larger-than-usual 50 basis point rate cut by the Fed, but those bets faded after Wednesday’s inflation report.
Despite the volatile bets on Thursday, traders are still betting on a 69% chance that the U.S. central bank will cut rates by just 25 basis points when it meets on Sept. 17-18, according to CME’s FedWatch tool. That would be the first rate cut since March 2020.
The S&P 500 rose 41.63 points, or 0.75%, to 5,595.76, while the Dow Jones Industrial Average rose 174.15 points, or 1.00%, to 17,569.68.
Small-cap companies, which are more sensitive to the economy, outperformed the rest, posting gains of 1.2%.
“There may be some bargain hunting,” said Chuck Carlson, chief executive of Horizon Investments in Hammond, Indiana. “Small-caps are an area that lags behind all year and tend to be sensitive to interest rates, so if rates go down that could have a decent impact.”
All 11 industry sectors in the S&P 500 ended higher today, led by the communications services sector, which added 2%.
The sector’s biggest gainer was Warner Bros. Discovery Inc. (NASDAQ: ), which surged 10.4% after it reported Charter Communications (NASDAQ:) The cable company will offer customers an ad-supported version of Warner’s Max and Discovery+ streaming services. Charter shares rose 3.6%.
Moderna shares ended the day down 12.4% after hitting their lowest level since November. The vaccine maker had forecast sales of between $2.5 billion and $3.5 billion next year, below analysts’ estimates.
In more positive news, Kroger (NYSE:) shares rose 7.2% after the department store chain beat second-quarter estimates and raised the bottom end of its annual sales forecast.
Gold mining stocks jumped after hitting a record high, with the Arca Gold Bogs Index up 5.8%.
Advancing issues outnumbered declining issues by a ratio of 3.45 to 1 on the New York Stock Exchange as there were 405 new highs and 46 new lows.
On the Nasdaq, 2,665 stocks advanced and 1,543 declined, with advancers outpacing decliners by a ratio of 1.73 to 1. The S&P 500 recorded 37 new 52-week highs and no new lows, while the Nasdaq Composite recorded 73 new highs and 76 new lows.
On US exchanges, 10.58 billion shares were traded, compared to a moving average of 10.82 billion shares over the past 20 sessions.