US PPI Solidifies Rate Cut Bets – US Market Wrap

Stocks rose and bond yields fell after the latest US inflation reading fuelled speculation that the Federal Reserve would be able to implement its widely anticipated interest-rate cut in September.

Just 24 hours before the consumer inflation report, data showed that the producer price index increased less than expected. The categories in the PPI report used to calculate the Fed’s preferred inflation measure, the personal consumption expenditures price index, were mostly benign. The S&P 500 increased 1.7%, driven by gains in the world’s largest technology companies. Treasuries rose across the curve, propelled by shorter maturities. The dollar fell.

The easing of price pressures has increased confidence that US officials can begin lowering borrowing costs while refocusing on the labor market, which is showing more signs of slowing. Fed Bank of Atlanta President Raphael Bostic said he’s waiting for “a little more data” before supporting a rate cut, but he expects to be ready “by the end of the year.”

Treasury 10-year yields fell six basis points, to 3.85%. Swap traders expected the Fed to cut interest rates by nearly 40 basis points in September and by about 105 basis points in total in 2024. Oil has halted a five-day rally.