50BP Cut A Far Off Dream? – US Market Wrap

A rally that’s already added over $1.3 trillion to the S&P 500 this week powered ahead as the latest economic data did little to alter bets on a series of Federal Reserve rate cuts.

Every major group in the US equity benchmark rose, with both mega and small caps outpacing the broader market. Treasuries saw small moves. Swap contracts priced in slightly higher odds of a half-point Fed reduction next week after a Wall Street Journal report said policymakers were considering whether to cut by 25 or 50 basis points.

The producer price index picked up slightly in August after the previous month’s numbers were revised lower, and categories that feed into the Fed’s preferred inflation gauge were muted. Separate data showed jobless claims ticked up.

The S&P 500 rose 0.8%. The Nasdaq 100 added 1%. The Dow Jones Industrial Average gained 0.6%. A gauge of the “Magnificent Seven” megacaps climbed 1.4%. The Russell 2000 advanced 1.2%. Nvidia Corp. paced gains in chipmakers, though Micron Technology Inc. sank on a downgrade. Wells Fargo & Co. slid on news the US is seeking fixes to money-laundering controls.

Treasury 10-year yields advanced three basis points to 3.68%. German bunds snapped a seven-day winning streak after European Central Bank President Christine Lagarde said rates will be sufficiently restrictive in the wake of an expected quarter-point interest rate cut to 3.5%. Oil climbed. Gold hit an all-time high.

The wholesale inflation data followed the more closely watched consumer price index, which showed underlying inflation accelerated in August. Yet policymakers have made it clear that they’re currently highly focused on softness in the labor market, which is more likely to drive policy discussions in the months ahead.