Inflation Data Fuels Expectations for Interest Rate Pause
Wall Street rose on Thursday after milder-than-feared July consumer prices data fueled hopes the Federal Reserve could leave interest rates unchanged next month. Data showed headline and core consumer prices both climbed by 0.2% in July, logging an annual rise of 3.2% and 4.7%, respectively. Buoyed by inflation numbers, traders not only expect the central bank to stop further monetary tightening in 2023, but they are also betting the Fed would start cutting interest rates early next year.
Expert Opinions on Inflation and Possible Fed Actions
"Inflation has returned to the good old days where in 2019 we saw an average monthly increase of around 0.2%... The Fed, therefore, might feel it can pause as planned and not raise interest rates in September," said George Mateyo, chief investment officer at Key Private Bank. San Francisco Fed President Mary Daly was cautious in her remarks, saying more progress was needed to feel comfortable with the central bank's position.
Treasury Yield and Tech Giant Growth
Limiting gains in mega cap growth names, yield on the benchmark 10-year treasury note reversed course to inch higher at 4.02%. Amazon.com, Microsoft, and Apple added between 1.1% and 0.5%.
Nasdaq Performance and AI Optimism
The tech-heavy Nasdaq led Wall Street lower on Wednesday but has gained about 32.2% so far this year. The gains are driven by hopes of a soft landing for the U.S. economy in the face of the Fed's aggressive interest rate hikes and optimism over the scope of artificial intelligence.
Stock Market Highlights
At 11:31 a.m. ET, key market indices like the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite were up, reflecting an overall positive sentiment in the market.
Unemployment and Corporate Earnings
Separately, new claims for unemployment benefits rose by 248,000 last week, more than estimates of 230,000 additions. On the earnings front, Walt Disney rose 3.2% after beating Wall Street estimates, and Capri surged 56.2% after an $8.5 billion deal with Tapestry, while Alibaba jumped 6.7% on upbeat quarterly sales.
Trade Concerns and Market Indicators
Heightening trade worries, President Joe Biden signed an executive order prohibiting some new U.S. investment in China in sensitive technologies and requiring government notification for other tech sectors. The overall market trend showed advancing issues outnumbered decliners on the NYSE and the Nasdaq, with several new highs and lows recorded in both indices.