By Abigail Summerville
(Reuters) – U.S. markets closed higher on Tuesday, reaching a near two-week high following softer producer prices data that reinforced expectations of an interest-rate cut by the Federal Reserve in September.
U.S. producer prices in July rose less than anticipated, with a rise in goods costs offset by lower services prices, indicating a continued moderation in inflation. The Producer Price Index (PPI) increased by 2.2% in the 12 months through July, compared to a 2.7% increase in June.
Investors are now awaiting important consumer price data for July on Wednesday and retail sales figures on Thursday to solidify expectations of an aggressive rate cut by the Federal Reserve.
“The core PPI number supports the idea that the Fed has effectively managed inflation and that a rate cut is more likely sooner rather than later,” said Michael James, managing director of equity trading at Wedbush Securities. “Any data point, like the CPI print tomorrow, will have a significant impact on the market due to current market volatility.”
Traders now see a 55% chance of a 50-basis-point rate cut by the Federal Reserve, up from less than 50% before the report, according to CME’s FedWatch Tool.
Stocks showed mixed performance on Monday, with the S&P 500 nearly flat and the Nasdaq slightly up, following a volatile week marked by mixed economic reports and a rate hike by the Bank of Japan.
The S&P 500 gained 90.04 points, or 1.68%, to close at 5,434.43 points, while the Nasdaq Composite rose 407.00 points, or 2.43%, to 17,187.61. The Dow Jones Industrial Average increased by 408.63 points, or 1.04%, to 39,765.64.
The top sector performers were information technology and consumer discretionary.
Energy shares declined due to lower oil prices following OPEC’s reduction in demand growth forecasts for 2024, which eased concerns about supply risks from escalating conflicts in the Middle East.
The Russell 2000 Index, focusing on small companies, rose by 1.6%.
Starbucks (NASDAQ:) was the top performer on the S&P 500, surging by 24.5%, its largest one-day percentage gain ever, after appointing Brian Niccol, the head of Chipotle Mexican Grill (NYSE:), as chairman and CEO.
Chipotle shares fell by 7.5%.
Home Depot (NYSE:) reversed losses and climbed by 1.2%. The home-improvement chain projected a decrease in annual profit and a larger drop in annual comparable sales.
BuzzFeed surged by 25.9% after narrowing its net loss in the second quarter to $6.6 million from $22.5 million in the previous year.
Advancing issues outnumbered decliners by a 4.36-to-1 ratio on the NYSE, while on the Nasdaq, advancing issues exceeded decliners by a 2.59-to-1 ratio.
The S&P 500 recorded 17 new 52-week highs and three new lows, while the Dow Jones Industrial Average registered 55 new highs and 128 new lows.