[New York Stock Market] Closes Higher on Wholesale Price Slowdown... Nasdaq Up 2.43%

On the 13th (local time), the three major indices of the U.S. New York stock market closed higher as the July Producer Price Index (PPI), a wholesale price indicator, came in below expectations, easing inflationary pressures.

At the New York stock market that day, the blue-chip-focused Dow Jones Industrial Average rose 408.63 points (1.04%) from the previous trading day to close at 39,765.64. The large-cap-focused S&P 500 index increased by 90.04 points (1.68%) to 5,434.43, while the tech-heavy Nasdaq index jumped 407 points (2.43%) to finish at 17,187.61.

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The market was driven by the U.S. Labor Department’s pre-market release of the wholesale price indicator showing a slowdown. The seasonally adjusted PPI increase for July was 0.1% month-over-month, below both the previous month’s rise of 0.2% and the 0.2% forecast by experts compiled by Dow Jones. On a year-over-year basis (not seasonally adjusted), the PPI rose 2.2%, significantly slowing from June’s 2.7% increase.

David Russell, Head of Global Market Strategy at TradeStation, said, “Today’s PPI data provides additional evidence that inflation trends, especially in the services sector, have shifted. Investors who recently sold stocks expecting a further decline may be frustrated as the anticipated drop has not materialized.”

Chris Larkin of Morgan Stanley E*Trade stated, “In a market seeking stability, we have received further evidence that inflation is cooling. Lower-than-expected inflation figures are likely to be welcomed as the stock market attempts a rebound from this year’s largest sell-off.”

The market is now focusing on the Consumer Price Index (CPI) to be released the following day. If the CPI also shows a slowdown following the PPI, concerns about inflation will ease further.

Chris Zaccarelli of Independent Advisor Alliance commented, “If tomorrow’s CPI comes in lower than expected like the PPI, the Federal Reserve will receive a clear signal that it could cut interest rates by 0.50 percentage points in response to an imminent economic slowdown.”

With inflation showing signs of easing, expectations for a Fed rate cut in September are growing. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market reflected a 54.5% probability that the Fed will cut rates by at least 0.50 percentage points at the September FOMC meeting.

By individual stocks, Nvidia surged 6.53%, while Apple and Microsoft rose 1.72% and 1.77%, respectively, showing strength in tech stocks. Tesla also climbed 5.24%. Starbucks jumped 24.5% after hiring Brian Niccol, the current CEO of Chipotle, as its next CEO. Conversely, Chipotle fell 7.5%. Home Depot closed up 1.23% despite lowering its annual sales forecast due to weak demand in its Q2 earnings report.

Following the news of slowing wholesale prices, Treasury yields declined. The U.S. 2-year Treasury yield, sensitive to monetary policy, dropped 7.7 basis points (1 bp = 0.01 percentage points) from the previous day to 3.938%, while the 10-year U.S. Treasury yield, a global bond benchmark, fell 5.9 basis points to around 3.85%.

International oil prices fell amid concerns over weakening oil demand. On the New York Mercantile Exchange, September delivery West Texas Intermediate (WTI) crude oil dropped $1.71 (2.14%) from the previous day to close at $78.35 per barrel. Brent crude, the global oil price benchmark, closed down $1.61 (1.96%) at $80.69 per barrel.