Markets Advance Amid Inflation Report and Fed Expectations
The US stock market rallied again this Wednesday, as it did in the previous days due to the optimism regarding a decrease in interest rates by the Federal Reserve in September. Recent economic updates demonstrated softening of the headline inflation in July, soothing fears of investors, and contributing to the assumption that monetary policy will be relaxed.
Dow Jones Industrial Average Leads Gains
The Dow Jones Industrial Average rose by 379 points or 0.86 percent, and posted a close of 44,839.44 points. This increase put the Dow in proximity to its highest point that was hit in December 2024. Of the 30 companies listed on Dow, 22 of them closed up on the session and eight of them dropped.
Dow Jones Industrial Average as of 12:55 UTC-4
S&P 500 and Nasdaq Hit Record Highs
The S&P 500 index gained 0.44 assets or closed at 6,474.20, also setting a fresh closing high. The index flirted with its highest ever intraday 6,446.55 points. The broad-based Nasdaq Composite Index rose by 0.39 percent to end at 21,766.23 based on the heavy contributions of large-cap tech stocks. It is important to note that both indexes weighed the investor confidence in the long-term economic growth and central bank policies aimed at being accommodative.
The S&P 500 index as of 12:56 UTC-4
Sector Performance and Market Breadth
The S&P 500 gained on all 11 sectors with consumer discretionary rising ahead of the rest with a 1.1% increase. The technology and communication services industries were up by 1.6 percent and 1.9 percent respectively. There were also positive gains in finances, consumer discretionary, industrials and materials that were at 1.3 to 1 percent. Breadth was healthy with the share of advancing stocks making new highs far exceeding the decliners on both the NYSE and the Nasdaq with margins of over 4-to-1 and nearly 3-to1 respectively.
Inflation Data Supports Rate Cut Hopes
The Labour Department has shown that the headline Consumer Price Index (CPI) went up by 0.2 percent in July compared to the anticipated 0.3 percent. A modest 2.7% gain in the CPI, 0.1 percent under projections, was up year over year. Core CPI, which omits or strips out the volatile food and energy prices, rose 0.3 percent as expected and is the fastest monthly increase since January. The implication of these figures is that consumer costs have not yet been fully affected by the tariff price pressures, which increases the chances of the Fed cutting down the rates.
Fed Rate Cut Expectations Gain Ground
The market now fully prices in a 25 basis point interest rate reduction in September. According to the CME FedWatch Tool, the probability of a rate cut stands near 100%, up from about 89% a week ago. Thomas Hayes, chairman of Great Hill Capital LLC, emphasised, “We’re almost certain that a minimum of 25 basis points of rate cuts will occur in September.” He highlighted the need for the Fed to address challenges in the labour market through monetary easing.
Small Caps and Volatility Indicators
The Russell 2000 index, representing small-cap stocks sensitive to interest rates, gained 0.8%, reaching a six-month peak. Lower borrowing costs will aid smaller companies in refinancing debt, benefiting many underperforming stocks. The CBOE Volatility Index (VIX), known as Wall Street’s fear gauge, fell to 14.46, its lowest level since January, signalling reduced market uncertainty.
Also Read: Wildfire Near Bayers Lake Business Park Forces Evacuations in Halifax
Earnings Reports and Market Movers
In corporate news, earnings season continues with mixed results. CoreWe experienced a 12% decline after reporting a quarterly net loss larger than expected. Nvidia, a key supporter of CoreWe, saw a minor stock correction. Meanwhile, semiconductor manufacturer NXP Semiconductors surged 7.3%, contributing significantly to tech sector gains.
Looking Ahead
Investors are keen on observing the upcoming statements by Federal Reserve policy makers especially Austan Goolsbee, President of the Chicago Fed and a voting member of the Federal Open Market Committee this year. The market has stayed close to the economic data and corporate earnings as it evaluates the perception of the monetary policy and growth.
Tuesday overall trading volume totaled 16.4 billion shares – below the 20-day average of 18.3 billion – and there were many more advancers than decliners. Intense market action in the backdrop of moderate inflationary statistics and broad based sector support indicates an optimistic outlook by investors in the weeks to come.
