Market Analysis

Wall Street's major indexes closed higher on Thursday, driven by inflation data that bolstered expectations of a 25-basis-point rate cut by the Federal Reserve. However, Moderna (NASDAQ: MRNA) weighed on the S&P 500 with the biggest percentage drop following a weak revenue forecast.

The producer price index (PPI) for final demand increased by 0.2% in August, exceeding the predicted 0.1% rise. Core PPI, which excludes the volatile food and energy sectors, climbed 0.3%, also surpassing the 0.2% forecast.

In a separate report, initial claims for state unemployment benefits totaled 230,000 for the week ending Sept. 7, aligning with expectations.

Peter Tuz, president of Chase Investment Counsel, noted, "This week's data indicates we're heading for a soft landing rather than a hard one. Investors remain optimistic about the stock market, especially in growth sectors, as long as they anticipate a rate cut and potential future cuts."

In recent weeks, weakening employment and economic data had led to speculation about a larger 50-basis-point rate cut. However, these expectations diminished after Wednesday’s inflation report. On Thursday, despite some fluctuation, traders still saw a 69% chance of a 25-bps rate cut during the Fed's Sept. 17-18 meeting, according to CME's FedWatch Tool. This would mark the first rate reduction since March 2020.

The Dow Jones Industrial Average rose by 235.06 points, or 0.58%, to 41,096.77. The S&P 500 climbed 41.63 points, or 0.75%, to 5,595.76, and the Nasdaq Composite advanced 174.15 points, or 1.00%, to 17,569.68.

Small-cap stocks, reflected in the Russell 2000 index, outperformed with a 1.2% gain, suggesting a possible bargain hunt in rate-sensitive sectors. Chuck Carlson, CEO of Horizon Investment Services, observed that "small caps have lagged all year, but if rates decline, they may benefit."

All 11 S&P 500 sectors finished the day higher, with communication services leading the gains at 2%. Warner Bros Discovery (NASDAQ: WBD) was the sector’s top performer, surging 10.4% after revealing a partnership with Charter Communications (NASDAQ: CHTR) to offer an ad-supported version of Warner’s streaming services, Max and Discovery+. Charter's shares also rose by 3.6%.

Moderna shares dropped 12.4%, hitting their lowest point since November. The company forecasted 2024 sales between $2.5 billion and $3.5 billion, falling short of analysts' expectations.

On the upside, Kroger (NYSE: KR) shares rallied 7.2% after the supermarket chain surpassed second-quarter estimates and raised the lower end of its annual sales forecast.

Gold miners saw significant gains as spot gold hit a record high, with the Arca Gold BUGS index rising 5.8%.

Advancing stocks outpaced decliners by a 3.45-to-1 ratio on the NYSE, where there were 405 new highs and 46 new lows. On the Nasdaq, advancing stocks outnumbered decliners by a 1.73-to-1 ratio, with 2,665 stocks rising and 1,543 falling. The S&P 500 registered 37 new 52-week highs and no new lows, while the Nasdaq saw 73 new highs and 76 new lows.

Trading volume on U.S. exchanges totaled 10.58 billion shares, slightly below the 10.82 billion daily average for the last 20 sessions.

Paraphrasing text from "Investing" all rights reserved by the original author.