Boosted by gains in tech heavyweights like SanDisk, the S&P 500 hit a new record high on Thursday, with mild PPI inflation data reinforcing market expectations that the Fed will not raise rates at its September meeting.
At the close, the Dow Jones Industrial Average gained 69.72 points, or 0.13%, to 53,839.99. The Nasdaq Composite rose 0.81% to 26,803.03. The S&P 500 rose 0.65%, breaking above 7,800 for the first time during the session and closing at a record 7,798.99.
Top Stock Movers
Star tech stocks were broadly higher, with Tesla leading gains, up 3.80%, while only Amazon fell, down 0.80%.
The Philadelphia Semiconductor Index rose 0.46%, with Intel up 3.58% and Qualcomm up 1.05%.
Memory chip companies surged, with SanDisk up 13.68%, SK Hynix and Western Digital up over 7%, and Seagate Technology and Micron Technology up over 4%.
The optical communications sector was under pressure, with Coherent down about 8% after reporting earnings, and Corning and Lumentum down over 5%.
Legendary investor Bill Ackman disclosed that Pershing Square executed its largest portfolio reshuffle in years, initiating a new position in streaming company Netflix; Netflix's stock rose 5.4% on the news.
Tapestry, the parent company of Coach, forecast weak full-year revenue growth, sending its shares plunging over 16%.
The Nasdaq Golden Dragon China Index fell 1.84%. After releasing earnings, JD.com fell 7.31%, Pinduoduo dropped 5.46%, Alibaba declined 2.44%, NetEase fell 1.18%, and Baidu slipped 0.15%.
Market Overview
The U.S. Bureau of Labor Statistics reported Thursday that wholesale costs for goods and services were unchanged month-over-month in July, below the market expectation of a 0.2% increase. Core PPI, excluding food and energy, rose 0.2% MoM, compared to a forecast of 0.3%. Overall PPI rose 4.7% year-over-year, while core PPI rose 4.2% YoY.
Following the data release, Treasury yields fell. The interest rate-sensitive 2-year Treasury yield dropped 5.9 basis points to 4.139%, and the benchmark 10-year yield fell 5.1 basis points to 4.64%. Traders further reduced the probability of a Fed rate hike in September. The CME FedWatch Tool shows traders pricing in a 63% chance the Fed will hold rates steady next month.
Chris Rupkey, chief economist at Fwdbonds, said: "All in all, price pressures down the production pipeline are not adding to consumer inflation risks. The second straight month with no increase in final demand prices isn't making the cost-of-living crisis any worse for Americans, and that's good news."
Bill Merz, head of capital markets research at U.S. Bank Wealth Management, said: "In terms of the current inflation situation, it's not yet enough to derail the current earnings-driven market." He added: "How the new Fed Chair, Kevin Warsh, will interpret this data and what actions he might take remains to be seen, and that's an uncertainty the market is digesting. But for now, marginal cooling in CPI and PPI is a positive signal for the market."
Richmond Fed President Tom Barkin said Thursday it's still uncertain whether the Fed needs to raise rates to bring inflation back to its 2% target. He cited several reasons why price pressures might ease on their own. Much of the current high inflation stems from various shocks that will eventually fade, including tariff hikes, higher oil prices, and the surge in demand and prices for materials and labor due to the AI construction boom, which will also cool at some point.
In contrast, Cleveland Fed President Beth Hammack reiterated her view Thursday that the Fed should raise rates immediately to lower inflation. "It's crucial that we act now to bring inflation back to target. The longer inflation stays above target, the harder it becomes to bring it down, and the greater the cost for businesses and ordinary people," she said.
The Middle East situation remains deadlocked. According to a CCTV News report, U.S. Defense Secretary Mark Hegarty said on August 13 that the U.S. military has sufficient resources to impose an "indefinite" maritime blockade on Iran and can rotate ships deployed in the region as needed. Hegarty told media: "The U.S. Navy is fully capable of sustaining such a blockade for as long as desired. We will continue rotating deployed ships as we have done before."
In recent weeks, strong earnings guidance from companies like Microsoft and Amazon has alleviated investor concerns about the massive capital expenditures for AI data centers. Jay Hatfield, CEO of Infrastructure Capital Advisors, said: "The AI earnings-driven tech bull market continues. This is an earnings-driven rally, not a bubble."
Commodities Performance
As U.S.-Iran tensions simmer, investors weighed the prospect of declining global crude demand, leading to a pullback in oil prices. The September West Texas Intermediate (WTI) crude futures contract fell $2.02, or 2.43%, to settle at $81.25 a barrel. The October Brent crude futures contract fell $1.91, or 2.15%, to settle at $87.07 a barrel.
Precious metals also performed poorly. The August COMEX gold futures contract fell 1.03% to settle at $4,363.60 per ounce, while COMEX silver futures fell 1.04% to settle at $64.87 per ounce.
