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  • Writer's pictureThe San Juan Daily Star

S&P 500 climbs as inflation data fuels interest rate optimism

The S&P 500 .SPXrose on Thursday after U.S. inflation data matched estimates, underscoring expectations the Federal Reserve could pause its monetary tightening, while Salesforce climbed following an up upbeat forecast.

The Nasdaq .IXIC reached its highest in four weeks after a Commerce Department report showed the Personal Consumption Expenditures (PCE) price index, considered the central bank’s preferred inflation gauge, climbed 3.3% in July on an annual basis, in line with expectations.

Excluding volatile food and energy components, the core PCE price index rose 4.2% in July, year-on-year, also in line with estimates.

Traders’ expectations for a pause in rate hikes at the Fed’s September policy meet remained at an 88.5% chance, while their bets on the central bank keeping rates unchanged in November stood at 51%, according to the CME Group’s FedWatch tool.

“Investors believe the Fed is data dependent, and the data is in the market’s favor. All these interest rate hikes are paying off,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.

Investors are awaiting more comprehensive non-farm payrolls data due on Friday for greaterclarity on the Fed’s likely monetary path.

HP Inc tumbled 6.6% after the personal computer maker trimmed its annual forecast due to slowing demand.

Traders’ bets on the Fed leaving interest rates unchanged in September stood at nearly 89%, up from 86% the day before, while bets of a pause in November rose to 54% from about 52%, the CME Group’s FedWatch tool showed.

U.S. Treasury yields slipped to a near three-week low, with the 10-year yield last at 4.12%.

Volume on U.S. exchanges was light, with 9.0 billion shares traded, compared to an average of 10.6 billion shares over the previous 20 sessions.

The S&P 500 climbed 0.38% to end at 4,514.87 points.

The Nasdaq gained 0.54% at 14,019.31 points, while Dow Jones Industrial Average rose 0.11% to 34,890.24 points.

Of the 11 S&P 500 sector indexes, nine rose, led by information technology, up 0.83%, followed by a 0.51% gain in energy.

Investors are now looking to the personal consumption expenditures price index, the Fed’s preferred measure of inflation, and non-farm payroll numbers due on Thursday and Friday, respectively, for more clues on interest rates.

Trading activity has been light this week ahead of Monday’s U.S. Labor Day holiday.

The yield on the 10-year Treasury notes US10YT=R eased to 4.09%, driving major growth stocks including Amazon AMZN.O, Meta Platforms META.O and Tesla TSLA.O up between 0.8% and 2.1%.

Salesforce CRM.N rallied 3.7% following upbeat revenue forecasts from the cloud-based software provider as it benefits from price hikes and a resilient demand.

The most traded stock in the S&P 500 was Tesla TSLA.O, with $22 billion worth of shares exchanged during the session. The electric car maker’s shares rose 0.8%.

Weekly jobless claims for the week ended Aug. 26 fell to 228,000, compared with estimates of 235,000 claims, reining in investor sentiment, the Labor Department said in a report.

The data follows smaller-than-expected growth in private payrolls on Wednesday that signaled a softening labor market and drove the S&P 500 to a three-week closing high.

All three main indexes were on course to post gains for the week but losses for August, with the S&P 500 and Nasdaq set for their first monthly declines since February.

The S&P 500 was up 0.20% at 4,524.12 points.

The Nasdaq gained 0.47% at 14,085.29 points, while the Dow Jones Industrial Average was down 0.10% at 34,856.97 points.

Among other stocks, Dollar General DG.N slumped over 12% after the discount retailer cut its annual same-store sales forecast. Rival Dollar Tree’s DLTR.O shares fell 1.9%.

Dismal manufacturing data from China sent U.S.-listed shares of Chinese companies JD.O and Baidu BIDU.O down 2.2% and 1.2%, respectively.

Across the U.S. stock market .AD.US, advancing stocks outnumbered falling ones by a 1.2-to-one ratio.

The S&P 500 posted 21 new highs and four new lows; the Nasdaq recorded 63 new highs and 71 new lows.

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