Wall Street advances as CPI report buoys trader bets on rate cuts

The blue-chip Dow Jones Industrial Average advanced 1.3%, led by gains in UnitedHealth Group Inc. and Sherwin-Williams Co. The tech-heavy Nasdaq 100 Index rose 0.6%.

Equities climbed on Thursday, touching new intraday records as investors expect an in-line inflation report to trigger a Federal Reserve interest rate cut next week.

The S&P 500 Index gained 0.8% at 12:56 p.m. in New York, led by the health care and materials sectors. The gauge is headed for a fourth day of gains, its longest winning streak since July. The blue-chip Dow Jones Industrial Average advanced 1.3%, led by gains in UnitedHealth Group Inc. and Sherwin-Williams Co. The tech-heavy Nasdaq 100 Index rose 0.6%.

The core consumer price index, excluding the often volatile food and energy categories, increased 0.3% from July, according to Bureau of Labor Statistics data out Thursday. When incorporating those components, the overall CPI rose 0.4%, the most since the start of the year.

“While today’s inflation numbers remain above the Fed’s stated 2% target, the data is not as concerning for the Fed as the rapidly weakening employment data from the last couple of months, paving the way for a rate cut at their meeting next week,” Dominic Pappalardo, chief multi-asset strategist at Morningstar Wealth, said in a note to clients.

“These numbers are very close to in line with what we thought the big surprises were,” David Kelly, chief global strategist at JPMorgan Asset Management, said in a Bloomberg TV interview after the release. “Everyone should sort of take a deep breath and not over-react,” he said.

Separately, applications for US unemployment benefits jumped last week to the highest level in almost four years, indicating layoff activity may be on the rise amid a sharp slowdown in hiring. Initial claims rose by 27,000 to 263,000 in the week ended Sept. 6, the highest since October 2021, according to Labor Department data released Thursday.

Strategists believe that a Fed rate cut next week is a certainty given the weakening US labor market.

“The Fed has been explicit that cuts are to reduce risks to the labor market,” said Dennis DeBusschere, president and chief market strategist at 22V Research LLC, in a note to clients.

Traders expect stocks to brush off weaker jobs data to end the year higher, the latest Markets Pulse survey showed. Investors remain optimistic even as the 14-day relative strength index is flashing warning signs within the S&P 500. At the same time, high-flying technology stocks are doing so well that some investors are bidding up put options to protect the year’s gains.

In other news, Centene Corp. was a top-performing stock in the S&P 500 Index, gaining 12% after the health-insurer reaffirmed its full-year guidance. Elsewhere, the European Central Bank held rates steady and cut its inflation outlook for 2027, while leaving its forecasts for 2025 and 2026 intact.

Still ahead Thursday, the Federal budget balance is expected at 2 p.m in New York. The University of Michigan survey on sentiment and inflation expectations will be released Friday.