Wall Street traders drove stocks higher and bond yields fell as more evidence of moderating inflation reinforced bets the Federal Reserve will refrain from raising interest rates next month.
Back-to-back gains in equities drove the S&P 500 to a record. The Nasdaq 100 added 1.15%. Money markets priced in less than a 40% chance of a September Fed hike. While Treasuries rose, the US sold 30-year bonds at the highest rate in a quarter of a century - a testament to investors' demand for compensation to finance the nation's deficit. Oil dropped to around $81.
US wholesale inflation decelerated in July by more than estimated as energy and food costs fell. The producer price index rose 4.7% from July 2025 after a 5.5% annual increase in June. On a month-over-month basis, the PPI was unchanged.
The report showed that inflation, while still way above the Fed's 2% target, is showing signs of stabilization following the oil-driven surge since the start of the Iran war, according to Glen Smith at GDS Wealth Management.
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Long-term yields surged past 5% this year on worries that higher energy prices would boost cost pressures, forcing the Fed to keep rates elevated. That's on top of heightened Treasury supply from years of fiscal deficits and a ramp-up of corporate borrowing to fund the artificial-intelligence boom.
Thursday's tame inflation print, paired with last week's softer-than-expected jobs report, will give Fed Chair Kevin Warsh more breathing room, and may just be enough to keep rates on hold, according to Arun Sundaram at CFRA.
"But the Fed's decision is far from settled," he said. "Investors still have several potential plot twists to digest."
While inflation doesn't seem to be reaccelerating - which is a step in the right direction - traders will monitor one more set of data in September, which will be key before the Fed decision, said Mona Mahajan at Edward Jones.
Fed Bank of Richmond President Tom Barkin laid out an argument to hold rates steady in light of signs that inflation is declining, but also acknowledged the risk that some price pressures could become embedded, eventually forcing officials to tighten policy.
His Cleveland counterpart Beth Hammack questioned whether recent signs of a slowdown in inflation will continue and reiterated her call to raise rates now.
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Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.7% as of 4 p.m. New York time
- The Nasdaq 100 rose 1.15%
- The Dow Jones Industrial Average rose 0.1%
- The MSCI World Index rose 0.5%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1529
- The British pound was little changed at $1.3487
- The Japanese yen was little changed at 159.52 per dollar
- Cryptocurrencies
- Bitcoin fell 0.3% to $63,353.13
- Ether was little changed at $1,886
Bonds
- The yield on 10-year Treasuries declined five basis points to 4.65%
- Germany's 10-year yield declined three basis points to 3.13%
- Britain's 10-year yield declined two basis points to 4.95%
Commodities
- West Texas Intermediate crude fell 2.5% to $81.21 a barrel
- Spot gold fell 1.4% to $4,347.66 an ounce
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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