Equity Bull Run Powered Ahead on PPI Surprise – US Market Wrap

Wall Street traders propelled stocks higher and bond yields lower as unanticipated inflation fell, fueling expectations that the Federal Reserve will continue interest rate cuts in September.

Just a week before the Fed decision, the first dip in producer prices in four months allayed concerns that high inflation would provide a problem for officials attempting to prevent a job loss. The market reacted immediately, with traders almost fully pricing in three rate cuts in 2025.

The S&P 500 reached new all-time highs, with technology driving the way. Oracle surged 36% as a strong cloud outlook solidified the software company’s position in the race to meet demand for AI computing. The two-year yield slipped two basis points to 3.54%.

The producer price index fell 0.1% in August from the previous month, while the July result was revised lower. It increased 2.6% over the previous year. Economists pay close attention to PPI since some components are utilized to compute the Fed’s preferred measure of inflation. Following the data, Trump called on the Fed to drop interest rates “significantly.”

The extent to which firms transfer the burden of tariffs on to consumers will be critical in determining the course of interest rates. In reality, emphasis will soon shift to consumer price data, which is expected Thursday. Forecasters anticipate another strong increase in the core metric, which excludes food and energy.