Stock Market Today: Wall Street Ticks Higher After Inflation Report

NEW YORK (AP) — Stocks are ticking higher as Thursday’s shaky day of trading comes toward a close following the latest update on inflation across the U.S.

The S&P 500 was 0.3% higher with about an hour remaining in trading. It’s on pace for just its second winning day in the last eight, but it had been up as much as 1.3% earlier in the day before swinging between gains and losses.

The Dow Jones Industrial Average was up 177 points, or 0.5%, at 35,301, and the Nasdaq composite was 0.3% higher.

The morning’s highly anticipated report showed U.S. consumers paid prices that were 3.2% higher in July than a year earlier. That’s a touch milder than the 3.3% inflation rate economists expected to see and down sharply from last summer’s peak above 9%. Beneath the surface, underlying trends for inflation were also within expectations.

The readings bolstered hopes among investors that the Federal Reserve’s campaign to grind down inflation is progressing and that it could maybe even be done hiking interest rates. High rates undercut inflation by slowing the entire economy and hurting investment prices, which raise the risk of a recession.

Such hopes helped the S&P 500 rally a big 19.5% through the first seven months of the year. But critics have been saying Wall Street latched too quickly and forcefully onto a belief that inflation is continuing to cool, the economy will avoid a recession and the Fed has already hiked rates for the final time this cycle. Several economists on Thursday said again that future moves by the Fed are still uncertain, tamping down some enthusiasm.

The Fed has said it will make upcoming decisions on rates based on what data reports say, particularly those on inflation and the job market. Its main rate is already at its highest level in more than two decades.

Thursday’s report likely gives the Fed a reason to hold rates steady at its next meeting in September, before it gets more economic data in the runup to the following meeting that ends Nov. 1, according to Gargi Chaudhuri, head of iShares Investment Strategy, Americas.

“Separating the signal from the noise, most of the components of inflation are heading in the right direction,” said Brian Jacobsen, chief economist at Annex Wealth Management. He said if the trends continue, it will be tough to justify another hike to interest rates.

Another report on inflation is looming on Friday, which will show how bad inflation was in July at the wholesale level. Then, more reports on inflation and one more on overall hiring for August will arrive before the Fed’s next meeting that ends Sept. 20.

Treasury yields in the bond market initially fell following the inflation data, along with a report that showed slightly more workers applied for unemployment benefits last week than expected. The number remains low compared with history, signaling the job market remains remarkably resilient despite much higher interest rates.

Fed officials would likely welcome some softening of the job market, which they would see as removing upward pressure on inflation.

The weekly data on unemployment claims, though, have given head fakes in the past about the trajectory of the job market, said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office. That could mean the cuts to interest rates that investors really desire may be further off than hoped.