Stock market today: Wall Street gains after inflation data clears way for rate cuts

NEW YORK — U.S. stocks rose slightly on a quiet Wednesday after the latest inflation information almost exactly matched economists' expectations.

The S&P 500 rose 0.4 percent, continuing one of its best days of the year, climbing to within 3.7 percent of its all-time high from last month. The Dow Jones Industrial Average gained 242 points, or 0.6 percent, to end the day above the 40,000-point mark for the first time in nearly two weeks. The Nasdaq Composite rose less than 0.1 percent.

US Treasury yields also remained relatively stable in the bond market after the US government announced that consumers paid 2.9 percent more for gasoline, food, housing and other items last month than a year earlier.

Fed on track for interest rate cut in September

The data should prompt the Federal Reserve to cut its benchmark interest rate at its next meeting in September, a move that Wall Street has long been waiting for. The Fed is keeping interest rates at economically damaging levels in the hope of curbing inflation, which topped 9% two years ago. Lower rates would ease pressure on the economy and on investment prices.

The only question is how big the first rate cut since the COVID crash in 2020 will be: the traditional quarter of a percentage point or a more dramatic half point?

Consumer inflation figures released on Wednesday were not as cool as the previous day's wholesale inflation figures, but are unlikely to change significantly, according to Chris Larkin, managing director of trading and investments at Morgan Stanley's E-Trade.

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If most data in the next few weeks point to a slowdown in the economy, the Fed could deepen its rate cuts, he said, including a report to be released Thursday on how much U.S. shoppers are spending at retail.

Economic concerns remain

Although the economy is still growing and many economists believe a recession is unlikely, there are growing concerns about the strength of the economy following July, when hiring by US employers was significantly worse than expected.

The yield on 10-year U.S. Treasury notes fell to 3.83 percent from 3.85 percent late Tuesday. It had risen to 4.70 percent in April as expectations of future rate cuts rose.

The yield on two-year U.S. Treasury notes, which is more in line with expectations for the Fed, rose to 3.95% from 3.94% late Tuesday, as traders weigh whether the cut expected in September will be the traditional move or a large-scale one.

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Corporate news influences the market

On Wall Street, Kellanova rose 7.8% after Mars announced it would buy the company behind Pringles, Cheez-Its and Kellogg's for $83.50 a share in cash. The companies put the total value of the deal at $35.9 billion, including debt. Kellanova was created when Kellogg Co. split into three companies in the summer of 2022.

Cardinal Health rose 3.7 percent after the stock joined the ranks of companies that reported higher profits for the spring than analysts expected.

On the losing side was Brinker International, the company behind Chili's and Maggiano's restaurants. It fell 10.7% after reporting weaker-than-expected profit for the latest quarter. That was despite rising sales at Chili's, which benefited from higher prices, more customers and the launch of the “Big Smasher” burger. Expectations were high for Brinker International when the report was released, with shares still up 45.6% year-to-date.

Starbucks fell 2.1%, giving up some of its big gains from the previous day, after the company announced it had poached Brian Niccol from Chipotle Mexican Grill to become CEO.

Overall, the S&P 500 rose 20.78 points to 5,455.21. The Dow rose 242.75 to 40,008.39 and the Nasdaq Composite rose 4.99 to 17,192.60.

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On foreign stock markets, indices recorded slight gains in much of Europe, but mixed figures in Asia.

Japan's Nikkei 225 has been at the centre of some of the wildest events in financial markets in recent weeks, rising 0.6 per cent after a day of ups and downs. Japan's controversial Prime Minister Fumio Kishida surprised the country on Wednesday by announcing that he would resign when his party elects a new leader next month.