Wall St rises on signs of disinflation

By Johann M Cherian and Bansari Mayur Kamdar

(Reuters) – Wall Street rose on Thursday after producer prices data provided further evidence of inflation cooling in the world’s largest economy, and stoked hopes that the Federal Reserve will soon end its monetary policy tightening.

U.S. producer prices barely rose in June and the annual increase in producer inflation was the smallest in nearly three years.

A separate report showed weekly jobless claims unexpectedly fell last week, indicating that the labor market remains tight.

“The PPI confirmed the cooling inflation shown in yesterday’s CPI, but the lower-than-expected weekly jobless claims number was a reminder of continued labor market tightness,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley (NYSE:) Global Investment Office.

“The Fed is still on track to raise interest rates in a couple of weeks, and investors will shift their focus to corporate balance sheets as earnings season kicks into gear.”

Traders continue to expect a 21% probability that the central bank will hike borrowing costs in its November meeting. [IRPR]

Markets have fully priced in a 25-basis-point rate hike later in July.

Seven of the 11 major sectors advanced, with communications services leading gains, rising 1.5%.

At 9:44 a.m. ET, the was up 92.93 points, or 0.27%, at 34,440.36, the S&P 500 was up 23.92 points, or 0.53%, at 4,496.08, and the was up 131.84 points, or 0.95%, at 14,050.80.

On Wednesday, the Nasdaq and the S&P 500 closed at over a year’s high, with megacap stocks leading gains after the CPI report showed consumer prices registered their smallest annual increase in more than two years.

As U.S. inflation cools and growth remains resilient, bullish investors are now counting on the second-quarter earnings season to provide more fuel for the rally in stocks.

PepsiCo (NASDAQ:) added 1.4% on raising its annual revenue and profit forecasts for the second time, banking on resilient demand for its snacks and beverages as well as price hikes.

Delta Air Lines (NYSE:) gained 1.1% after it lifted its full-year profit outlook following stronger-than-expected second-quarter earnings on a relentless post-pandemic travel boom.

Overall, earnings for the S&P 500 constituents are expected to have dropped 6.4% in the second quarter, Refinitiv data showed.

Meta Platforms, which recently launched Twitter-rival Threads, outpaced gains among big growth stocks, adding 1.6%. It is set to release a commercial artificial intelligence (AI) model, as per a report.

Markets will parse remarks by policymakers during the day, including Fed Board Governor Christopher Waller, to gauge the tone of the central bank on monetary policy tightening.

Advancing issues outnumbered decliners by a 2.03-to-1 ratio on the NYSE and by a 1.82-to-1 ratio on the Nasdaq.

The S&P index recorded 29 new 52-week highs and no new lows, while the Nasdaq recorded 58 new highs and 15 new lows.