Wall Street has advanced after US producer prices data showed abating inflation pressures, keeping the Federal Reserve on track to cut rates in September while Starbucks soared after appointing Chipotle’s Brian Niccol as CEO.
US producer prices increased less than expected in July as a rise in the cost of goods was tempered by cheaper services, indicating that inflation continued to moderate.
In the 12 months through July, the PPI increased 2.2 per cent after climbing 2.7 per cent in June.
“This creates more flexibility for the Fed to lower rates later this year without a doubt and that’s what driving the market response right now,” said Dave Grecsek, managing director in investment strategy and research at Aspiriant.
Yield on the 10-year Treasury note and on the 2-year note ticked lower after the data while traders’ bets of a 50-basis-point rate cut increased to more than 50 per cent after the report, according to CME’s FedWatch Tool.
Markets expect the interest rates to be reduced by a total of 100 basis points by the end of 2024.
Investors now await the all-important consumer price (CPI) figures for July on Wednesday and retail sales data on Thursday to firm bets on an aggressive rate cut by the US central bank.
Stocks wobbled on Monday with the S&P 500 nearly flat and the Nasdaq eking out modest gains, following a turbulent week marked by mixed economic reports and a rate hike by Japan’s central bank.
In early trading on Tuesday, the Dow Jones Industrial Average rose 183.81 points, or 0.47 per cent, to 39,540.82, the S&P 500 gained 45.19 points, or 0.85 per cent, to 5,389.58 and the Nasdaq Composite gained 208.14 points, or 1.24 per cent, to 16,991.01.
Ten of the 11 major S&P sectors were trading higher, with information technology and communication services leading gains.
Energy shares were an outlier, dipping on lower oil prices as OPEC’s move to cut its forecast for demand growth in 2024 tempered fears of supply risks posed by widening conflict in the Middle East.
Starbucks was the top performer on the S&P 500, rising 19.6 per cent and was on track for its biggest one-day percentage gain in at least 15 years after it appointed Chipotle Mexican Grill head Brian Niccol as chairman and chief executive officer.
Chipotle dropped 10.3 per cent.
Home Depot eased 0.5 per cent after the home improvement chain forecast a decline in annual profit and a bigger drop in its annual comparable sales.
Chipmaker Nvidia led gains amongst megacap and growth stocks with a more than 3.0 per cent gain while the Philadelphia SE Semiconductor Index was last up 1.3 per cent, touching a near two-week high.
BuzzFeed jumped 10 per cent after the digital media company narrowed its net loss in the second quarter to $US6.6 million ($A10 million) from $US22.5 million a year earlier.
Hormel Foods added 2.8 per cent after Citigroup upgraded its rating to “buy” from “neutral” becoming the only one with this rating on the Skippy peanut butter maker.
Investors will look ahead to comments from Atlanta Fed President Raphael Bostic on Tuesday on the outlook for the US economy.
Wall Street’s fear gauge, the CBOE Volatility Index, was at 19.49 points after falling to 18.87 on Monday.
Advancing issues outnumbered decliners by a 3.77-to-1 ratio on the NYSE and by a 2.66-to-1 ratio on the Nasdaq.
The S&P 500 posted seven new 52-week highs and two new lows while the Nasdaq Composite recorded 24 new highs and 49 new lows.