US stocks climbed sharply on Thursday, with all three major indexes setting fresh records as traders bet that August inflation data won’t derail a Federal Reserve rate cut next week. The Dow Jones Industrial Average jumped 617 points, or 1.36%, to 46,108. The S&P 500 rose 0.85% to 6,587, and the Nasdaq advanced 0.72% to 22,043. Each index also posted new intraday highs during the session.
Mixed inflation signals
The latest consumer price index showed prices rising 0.4% in August, hotter than the 0.3% forecast. On an annual basis, CPI matched expectations at 2.9%, while core CPI, excluding food and energy, increased 0.3% for the month and 3.1% year-on-year. That report followed Wednesday’s surprise decline in producer prices, which fell 0.1%.
Labour market softens
Adding to the picture of cooling economic momentum, weekly jobless claims rose by 27,000 to 263,000, the highest since October 2021 and well above forecasts. Combined with weaker job growth revisions earlier in the week, the data reinforced expectations that the Fed will move to cut rates. The yield on the 10-year Treasury fell to 4%, briefly dipping below that threshold.
Rate cut expectations
Markets now see a quarter-point reduction at the Fed’s September 17 meeting as virtually certain, with some investors still eyeing the possibility of a deeper half-point move. Freedom Capital Markets strategist Jay Woods said, “A quarter-point cut is a layup, and the number still keeps a half-point cut on the table, especially when looking at the jobless data. The bottom line is watch the 10-year yield—if it holds a three-handle, the market could rally here.”
Broader market strength
Thursday’s gains were broad-based, with banks such as JPMorgan and consumer names like Walmart climbing on expectations of lower borrowing costs. Analysts at Evercore ISI said the benign price data support an outlook for three successive cuts by year-end, while Yardeni Research lifted its S&P 500 target to 6,800, citing a rising chance of a “melt-up” scenario that could drive the index as high as 7,000.
Australian outlook and global agenda
Australian shares are set to open higher, with ASX 200 futures pointing up 47 points, or 0.5%, to 8,854.
Looking ahead, the RBA’s assistant governor Brad Jones will speak in Sydney this afternoon. Key international data includes New Zealand’s manufacturing PMI, industrial production figures from Japan and the UK, and the University of Michigan sentiment survey due tonight.
