Wall Street Rallies As Inflation Data Fuels Fed Rate Pause Hopes

Wall Street rose on Thursday after milder-than-feared July consumer prices data fueled hopes the Federal Reserve could leave interest rates unchanged next month.

The consumer price index (CPI) for July climbed 3.2% on an annual basis, less than the 3.3% rise expected by economists.

Excluding volatile components such as food and energy, prices rose 4.7% in the 12 months to July compared with a 4.8% rise seen in the month before.

Separately, the number of Americans filing new claims for unemployment benefits rose by 248,000 last week, more than estimates of 230,000 additions.

Traders remain optimistic the Fed has completed its aggressive interest rate hike campaign, with bets on another rate hike in the remaining months of the year staying below the 30% mark after the CPI data. IRPR

“U.S. inflation came in broadly as expected in July, although the year-on-year figure is a little lower than anticipated,” said Neil Birrell, chief investment officer at Premier Miton Investors.

“The August number will be out before the Fed next meets in mid-September, but there is nothing in this release to suggest that they will do anything other than keep interest rates exactly where they are.”

Taking some pressure off rate-sensitive growth names, yield on the benchmark 10-year U.S. treasury note , fell to 3.98% in choppy trading after the data.

Amazon.com (AMZN.O), Microsoft (MSFT.O) and Apple (AAPL.O) added between 0.9% and 1.3%.

Later in the day, investors will also parse comments from several Fed officials including Philadelphia President Patrick Harker, a voting member this year.

The tech-heavy Nasdaq led Wall Street lower on Wednesday, with heavyweight Nvidia (NVDA.O) falling 4.7%, followed closely by the other “Magnificent Seven” megacap stocks that drove this year’s stock rally.

Nasdaq has gained about 32.5% so far this year on hopes of a soft landing for the U.S. economy in the face of the Fed’s aggressive interest rate hikes, and optimism over the scope of artificial intelligence.

At 09:40 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 335.30 points, or 0.95%, at 35,458.66, the S&P 500 (.SPX) was up 40.72 points, or 0.91%, at 4,508.43, and the Nasdaq Composite (.IXIC) was up 143.56 points, or 1.05%, at 13,865.58.

All of the 11 major S&P 500 sectors advanced, with the communication services sector (.SPLRCL) housing Meta Platforms (META.O) and Alphabet (GOOGL.O) leading gains, up 1.2%.

On the earnings front, Walt Disney (DIS.N) rose 1.0% after beating Wall Street estimates for quarterly adjusted profit per share.

Capri (CPRI.N) surged 56.8% after larger rival Tapestry (TPR.N) said it would buy the Michael Kors parent in an $8.5 billion deal. Tapestry’s shares fell 9.1%.

U.S.-listed shares of Alibaba added 5.5% after the e-commerce conglomerate reported upbeat quarterly sales on the back of improved consumer sentiment.

Heightening trade worries, President Joe Biden on Wednesday signed an executive order that prohibits some new U.S. investment in China in sensitive technologies such as computer chips and requires government notification for investment in other tech sectors.

Advancing issues outnumbered decliners by a 4.18-to-1 ratio on the NYSE and a 2.18-to-1 ratio on the Nasdaq.

The S&P index recorded nine new 52-week highs and one new low, while the Nasdaq recorded 25 new highs and 38 new lows.

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