S&P 500, Nasdaq hover near record highs on September rate cut hopes
Signs that U.S. tariffs on imports have not fully filtered into headline consumer prices came as a relief for investors this week as they scour for insights on the impact trade uncertainty has had on the economy.
Despite data showing underlying price pressures were on the rise, markets also factored in recent weakness in the job market and a shake-up at the Federal Reserve as they leaned in favor of a potential dovish move by the central bank in September.
Traders are now fully pricing in a 25 basis points interest rate cut, according to the CME's FedWatch Tool, up from 89.2% last week. The central bank last lowered borrowing costs in December.
Treasury Secretary Scott Bessent also said he thought an aggressive half-point cut was possible given recent weak employment numbers.
Stagflation "was the first word that came to my mind when I saw this CPI report yesterday," said Mark Hackett, chief market strategist at Nationwide, referring to Tuesday's data coming on the heels of a number of other reports pointing to a cooling economy.
"The slowdown that we're seeing is probably fairly temporary, at least at this point. So inflation is something that we're absolutely worried about because we saw that uptick."
At 12:18 p.m. ET, the Dow Jones Industrial Average (.DJI), opens new tab rose 363.26 points, or 0.82%, to 44,821.52, the S&P 500 (.SPX), opens new tab gained 9.34 points, or 0.15%, to 6,455.15 and the Nasdaq Composite (.IXIC), opens new tab advanced 15.77 points, or 0.07%, to 21,697.97.
The blue-chip Dow (.DJI), opens new tab was within 1% away from an all-time high and the Russell 2000 index (.RUT), opens new tab, which tracks rate-sensitive small-cap companies, added 0.1.3% to hit a six-month high.
Investors were also taking notice of other sectors following the recent tech-led rally in U.S. stocks that have pushed valuations of the S&P 500 above long-term averages.
Healthcare stocks (.SPXHC), opens new tab, which have been beaten down for much of the year, led gains among the 11 S&P 500 sectors with a 1.4% rise, while the tech-heavy Nasdaq 100 index (.NDX), opens new tab was marginally lower.
Later in the day, investors will scrutinize remarks of a number of policymakers, especially Chicago Fed President Austan Goolsbee.
CoreWeave (CRWV.O), opens new tab, which is backed by Nvidia (NVDA.O), opens new tab, slumped 17.6% after the AI data center operator reported a bigger-than-expected quarterly net loss.
Eyes are also on developments surrounding the China revenue-sharing deal the U.S. government signed with top chipmakers, which the White House said could be expanded to others in the sector.
Paramount Skydance (PSKY.O), opens new tab jumped 30%. The company won exclusive broadcasting rights to the Ultimate Fighting Championship for seven years earlier this week.
In geopolitics, traders also were keen on a meeting between Trump and Russia's Vladimir Putin on the Ukraine conflict scheduled on Friday.
Advancing issues outnumbered decliners by a 2.96-to-1 ratio on the NYSE and by a 2.28-to-1 ratio on the Nasdaq.
The S&P 500 posted 37 new 52-week highs and two new lows, while the Nasdaq Composite recorded 131 new highs and 49 new lows.
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