Stocks Rally to Records as Cooling Inflation and Weak Jobs Data Boost Fed Cut Bets – US Market Wrap

A relatively low inflation reading, combined with more signs of job growth slowing, fuelled a rally on Wall Street amid speculation that the Federal Reserve will cut interest rates for the first time this year.

The highly anticipated consumer price index revealed that, while inflation remains above the Fed’s 2% target, it is not out of control. Along with that report came the usually noisy jobless claims figures, which jumped to their highest level in nearly four years, fuelling speculation that policymakers will cut interest rates next week in an effort to counteract a rapid labour market slowdown.

That was enough to push Treasuries higher, with the 10-year yield briefly exceeding 4%. In a broad advance, all major US equity benchmarks reached all-time highs. A measure of small caps increased by nearly 2%. Gold has surpassed its inflation-adjusted peak set in 1980. Energy stocks fell in tandem with oil prices.

A slowing job market has prompted markets to price in a more aggressive path of rate cuts, with an increasing number of economists predicting a quarter-point rate cut at each of this year’s three remaining meetings. Fed Chair Powell cautiously hinted at a rate cut at the Fed’s Jackson Hole symposium last month, and more recent data showed the hiring slowdown continued into August.