The Dow, S&P 500 Nasdaq jumped to record highs Thursday as in-line consumer inflation data all but cemented a Federal Reserve rate cut next week
At 2:55 p.m. ET (18:55 GMT), the Dow Jones Industrial Average gained 594 points, or 1.3%, the S&P 500 index rose 0.8% and the NASDAQ Composite climbed 0.7%, with all three indexes hitting record intraday highs.
CPI points to Fed rate cut
The benchmark indices have posted all-time highs of late, with both the S&P 500 and tech-heavy NASDAQ Composite closing at all-time peaks Wednesday, on increasing expectations of an interest rate cut by the Federal Reserve next week.
Data released earlier Thursday showed that the U.S. consumer price index came in at 2.9% in the 12 months to August, compared to 2.7% in July and matching economists’ expectations. Month-on-month, the inflation gauge stood at 0.4%, faster than 0.2% in the prior month and slightly above forecasts of 0.3%.
While the month-on-month increase in CPI for both headline and core as the biggest since January, Jefferies said it doesn’t think that "anything has changed for the FOMC decision next week." "The recent revelations of weakness in the labor market are going to push the Committee toward a 25 bp cut," it added, forecasting three rate cuts this year.
This followed on from Wednesday’s August’s producer price index, which came in well below forecasts – providing fresh evidence of cooling wholesale price pressures.
Additionally, the number of Americans filing new applications for jobless benefits increased sharply last week, consistent with a material softening in labor market conditions.
Initial claims for state unemployment benefits jumped 27,000 to a seasonally adjusted 263,000 for the week ended September 6, the Labor Department said on Thursday.
The data strengthened the case for the Fed to initiate a rate-cut cycle, starting in all probability with a quarter-point reduction at its September 17 meeting.
"Slightly lower rates from the Fed should dovetail with growth impulses that are generated by the One Big Beautiful Bill, and "uncertainty" over tariffs and trade policy should no longer be a significant hindrance to business investment. Thus, while we are confident in our expectations for rate cuts this year, we do not see the Fed continuing with further cuts in 2026.
Delta, Kroger in earnings spotlight; Adobe earnings eyed
Delta Air Lines Inc fell even as the airline flagged struggles with soft demand for economic-class seats, though lifted its revenue forecast for Q3.
In chip stocks, meanwhile, Micron Technology Inc surged after Citi hiked its price target on the stock on expectations that growing data center demand will help the memory chipmaker deliver better-than-expected results
Retail heavyweight Kroger Company stock rose after the U.S. grocer raised its annual core sales forecast, banking on resilient demand for its lower-priced products amid growing concerns over tariff-related pressure on consumer demand.
Up next on the earnings calendar will be software tools provider Adobe Systems who will report its quarterly returns after the closing bell.
In June, San Jose-based Adobe raised its annual financial guidance, but sentiment surrounding the firm has since turned negative, with many investors flagging that Adobe faces "significant cyclical and secular headwinds," analysts at Vital Knowledge said in a note.