Updated at 10:14 am EST
U.S. stocks moved higher again Thursday, with the dollar nursing its biggest one-day decline in five months, as investors looked to re-set rate expectations from the Federal Reserve following yesterday’s softer-than-expected July inflation reading.
Stocks were also given an extra boost from falling factory gate inflation, which contracted by 0.5% on the month and slowed to 9.8% from last year, well inside the Street’s 10.2% forecast.
That data, however, was clouded by another jump in weekly jobless claims, which rose by 2,000 to 262,000 over the period ending August 6, the highest since November of last year.
Plunging gas prices helped produce a flat month-on-month CPI tally in July, while the annual rate of inflation slowed to 8.5%, according to data from the Bureau of Labor Statistics, with economists now forecasting a series of slower readings over the autumn months.
The pullback in consumer price pressures triggered a sharp rally on Wall Street, with the tech-focused Nasdaq rising 2.9% to help it to a 20% gain from its mid-June lows.
Rate bets were also tempered, with the CME Group’s FedWatch now suggesting on a 37.5% chance of another 75 basis point hike in September, down from around 66.5% prior to the inflation release.
Fed officials were more tempered, with Minneapolis Federal Reserve Bank President Neel Kashkari telling the Aspen Ideas Conference in Colorado that the central bank is “”far, far away from declaring victory”, and still sees the need of a Fed Funds rate approaching 4% by the end of the year.
Broader markets, however, are re-setting for less aggressive approach: the dollar index, which tracks the greenback against a basket of six global currencies, fell the most in five months yesterday and was marked another 0.17% lower in overnight trading at 105.024.
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U.S. Treasury bond trading was essentially muted overnight amid a market holiday in Japan, but yesterday’s $35 billion 10-year note auction saw the best domestic and foreign demand in five months as investors snapped-up the longer-dated paper amid lessening inflation fears.
In early New York dealing, 10-year notes were pegged at 2.802% while 2-year notes were trading in 3.162%.
In overseas markets Thursday, European stocks were only modestly higher, with Stoxx 600 rising 0.07% in late-day Frankfurt trading, as investors exited for the traditional August holiday following yesterday’s CPI data. With the Nikkei 225 closed in Tokyo, Asia markets rode last night’s rally on Wall Street to lift the region-wide MSCI ex-Japan index to a 1.7% gain heading into the close of trading.
On Wall Street, the S&P 500 was marked 42 points higher in the opening hours of trading while the Dow Jones Industrial Average gained 300 points. The Nasdaq was up 150 points.
Walt Disney (DIS) – Get The Walt Disney Company Report shares were the main early mover, surging 7.8% after the media and entertainment group blasted Street earnings forecasts, unveiled new pricing structures for its direct-to-consumer platforms and overtook Netflix (NFLX) – Get Netflix Inc. Report as the world’s biggest streaming service.
Pfizer (PFE) – Get Pfizer Inc. Report shares were also active, falling 2.8% amid investor concern over potential litigation linked to the popular, but now-discontinued, heartburn treatment known as Zantac.
In other markets, gas prices fell below $4 a gallon around the nation last night, according to data from the AAA motor club, pulling pump costs to the lowest levels since early March.
WTI crude futures for September delivery, the most tightly-connected contract to U.S. gas prices, were marked 57 cents higher in overnight trading at $92.50 per barrel, but are down around 33% from the highs they reached in the immediate aftermath of Russia’s invasion of Ukraine earlier this year.