Wall Street closed sharply higher on Thursday, pulled up by materials and discretionary stocks. Inflation numbers and labor market data released through the day further fueled the notion that there would be multiple rate cuts in 2025 by the Fed starting next week. All three benchmark indexes finished in the green, attaining record closes.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) climbed 1.4%, or 617.08 points, to close at 46,108.00. Twenty-five components of the 30-stock index ended in positive territory, while five ended in negative.
The tech-heavy Nasdaq Composite added 157.02 points, or 0.7%, to close at 22,043.08.
The S&P 500 gained 55.43 points, or 0.9%, to close at 6,587.47. All 11 broad sectors of the benchmark index closed in the green. The Materials Select Sector SPDR (XLB), the Consumer Discretionary Select Sector SPDR (XLY) and the Health Care Select Sector SPDR (XLV) advanced 2.1%, 2% and 1.7%, respectively.
The fear gauge CBOE Volatility Index (VIX) decreased 4.2% to 14.17. A total of 18.2 billion shares were traded on Thursday, higher than the last 20-session average of 16.1 billion.
Markets Up as Inflation & Labor Data Boost Fed Rate Cut Expectations
Wall Street closed sharply higher on Thursday after a mix of recent inflation and labor-market data added to investor conviction that the Federal Reserve is poised to begin cutting rates as soon as next week. The S&P 500, Dow Jones and Nasdaq all pushed into record territory as traders parsed through the numbers with an eye toward the Fed meeting next week. Currently, it is expected that there would be at least two 25-bps rate cuts in the remainder of 2025.
The win comes even though inflation remains sticky. Consumer price inflation rose about 2.9% yearoveryear in August, the fastest annual pace since January. Core inflation, excluding volatile food and energy items, stayed elevated. At the same time, softer signals from the labor market helped tip the balance toward expectations of monetary easing. Weekly unemployment benefit claims rose, and hiring has noticeably cooled. Bond markets responded accordingly. Treasury yields dropped as investors priced in a higher probability of one or more rate cuts beginning at the upcoming Fed meeting.
Sectors most affected by high borrowing costs attracted renewed investor interest, adding momentum to the rally. Even though inflationary pressures remain, the dominant belief in markets is that the Fed will give greater weight to signs of a weakening labor market than to persistent price concerns. This outlook fueled broad gains, with the Dow surpassing the 46,000 milestone for the first time and all three benchmark indexes closing on record highs. Going forward, the trajectory will hinge on fresh economic data and how the Fed communicates its next steps, but for now, investors are firmly betting on rate cuts rather than further tightening.
Consequently, shares of Linde plc LIN and The Home Depot, Inc. HD jumped 2.3% and 2.5%, respectively. Both currently carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Economic Data
For the week ending Sept. 6, initial claims came in at 263,000, an increase of 27,000 from the previous week's revised level. This is the highest level for initial claims since Oct. 23, 2021, when it was 268,000. The previous week's level was revised down by 1,000 from 237,000 to 236,000. The 4-week moving average was 240,500, an increase of 9,750 from the previous week's revised average. The previous week's average was revised down by 250 from 231,000 to 230,750.
Continuing claims during the week ending Aug. 30 were 1,939,000, unchanged from the previous week's revised level. The previous week's level was revised down by 1,000 from 1,940,000 to 1,939,000. The 4-week moving average was 1,945,750, a decrease of 750 from the previous week's revised average. The previous week's average was revised down by 250 from 1,946,750 to 1,946,500.
Per the U.S. Bureau of Labor Statistics, the consumer price index (CPI) for August increased 0.4%. The number for July remained unrevised at an increase of 0.2%. Core CPI for August rose 0.3%, the same as July.
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The Home Depot, Inc. (HD): Free Stock Analysis Report Linde PLC (LIN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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