U.S. stocks saw a slight increase on Wednesday after the latest update on inflation came in as expected. The S&P 500 rose 0.4% following one of its best days of the year, inching closer to its all-time high. The Dow Jones Industrial Average also gained 0.6%, reaching above the 40,000 level for the first time in nearly two weeks. The Nasdaq composite edged up slightly as well. Treasury yields remained steady in the bond market after the U.S. government reported a 2.9% increase in consumer prices compared to a year earlier. This data is expected to keep the Federal Reserve on track to cut interest rates at its next meeting in September, a move that could ease pressure on the economy and investment prices.
The uncertainty lies in the size of the rate cut that the Federal Reserve will make in September. Economic indicators in the coming weeks will determine whether the Fed will opt for a traditional quarter-point cut or a more significant half-point cut. Chris Larkin, managing director at E-Trade, believes that if data continues to show a slowing economy, the Fed may choose to cut more aggressively. An upcoming report on U.S. retail spending will provide further insight into the health of the economy. Despite concerns about the strength of the economy following disappointing job numbers in July, most economists do not predict a recession.
Yields on the 10-year Treasury eased slightly, dropping from 3.85% to 3.83%, as expectations of interest rate cuts have increased. The two-year Treasury yield, which closely tracks expectations for the Fed, edged up slightly. On Wall Street, there were mixed performances among companies. Kellogg rose after Mars announced its acquisition of the company behind popular snacks like Pringles and Cheez-Its. Cardinal Health also saw an increase in its stock price after reporting stronger profits than expected. However, Brinker International, the parent company of restaurant chains Chili’s and Maggiano’s, experienced a drop in its stock price after reporting weaker profit for the quarter. Starbucks fell 2.1% after announcing a new CEO appointment.
In global markets, European indexes saw modest gains while Asian markets were mixed. Japan’s Nikkei 225 index rose by 0.6% following a volatile period of trading. Japanese Prime Minister Fumio Kishida surprised the country by announcing his decision to step down when his party selects a new leader next month. Overall, the U.S. stock market reflected a sense of cautious optimism as investors await further economic data and the Federal Reserve’s decision on interest rates in September.
