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The stock market was on fire Thursday. The Dow Jones shot up more than 570 points by late morning. That’s about a 1.3% jump. The S&P 500 rose 0.8% and the Nasdaq climbed 0.7%. All three touched record highs during the day.
The reason is simple. Inflation numbers matched what experts had expected. This has pretty much sealed the deal that the Federal Reserve will cut interest rates next week.
The new consumer price index showed inflation at 2.9% in August. That’s a bit higher than July’s 2.7%, but it was exactly what economists had predicted. Month to month, prices rose 0.4%. That’s faster than the previous month and a little higher than forecasts. Even so, analysts believe the Fed won’t change its mind. Most expect a quarter-point rate cut on September 17. Some even think there could be three cuts this year.
On top of that, job market data showed weakness. Jobless claims rose sharply, with more than 263,000 people filing for unemployment benefits in early September. That’s a sign that the labor market is softening, which gives the Fed even more reason to act.
Earlier this week, wholesale price data also came in lower than expected. That suggests inflation pressures at the business level are cooling too.
The combination of weaker jobs data and steady inflation is why investors are confident about a rate cut. Slightly lower borrowing costs are expected to help businesses and consumer spending. Analysts believe cuts will continue into 2025, but probably not beyond that.
Corporate news also moved stocks. Delta Airlines slipped after warning of weaker demand for economy seats, though it still raised its revenue outlook for the quarter. Micron Technology soared after Citi raised its price target, betting on strong demand from data centers. Kroger gained ground after lifting its annual sales forecast, as shoppers look for cheaper groceries in the face of economic uncertainty.
Investors are now waiting for Adobe’s earnings report, due after the closing bell. The company had raised its full-year outlook back in June. But in recent weeks, analysts have turned cautious, saying Adobe could face both short-term challenges and longer-term hurdles.