Stocks Hit Records as Strong Economic Data Lifts Yields Ahead of Key Inflation Report – US Market Wrap

A strong economic reading pushed stocks to new all-time highs, but traders refrained from making large moves ahead of inflation data, which could provide more clues about the pace of Federal Reserve rate cuts. Short-term Treasury yields rose. The dollar fell.

Just 24 hours before the release of the Fed’s preferred price gauge, data showed that the US economy expanded faster than expected, highlighting the resilience of America’s primary growth engine – consumer spending.

While this alleviates recession fears, it raises concerns about the inflation outlook. According to a report due out on Friday, the personal consumption expenditures price index excluding food and energy increased 2.9% in July compared to the previous year. That would be the fastest pace in five months.

The S&P 500 surpassed 6,500, driven by gains in technology stocks. Nvidia’s losses narrowed as several analysts raised their price targets despite an unimpressive forecast.

The policy-sensitive two-year yield increased two basis points to 3.63%. Swap contracts continued to fully price in a quarter-point Fed rate cut this year by October, followed by another by the end of the year. About 20 basis points of easing are expected in September.