Falling Producer Prices Boost U.S. Stocks While Bond Yields Retreat

U.S. equity benchmarks climbed on Wednesday after government data showed an unexpected slowdown in producer inflation, easing pressure on Treasury yields and reinforcing expectations for future Federal Reserve rate cuts.

Indexes Edge Higher as Inflation Gauge Cools

Shortly after midday in New York, the S&P 500 gained 0.46 percent, setting a fresh record. The Nasdaq 100 advanced 0.27 percent, touching a four-week high, while the Dow Jones Industrial Average slipped 0.24 percent. In futures trading, September E-mini contracts pointed to continued strength, with S&P up 0.46 percent and Nasdaq ahead 0.26 percent.

The move followed a softer August Producer Price Index (PPI). Final-demand prices rose 2.6 percent year over year, down from July’s 3.1 percent and below the 3.3 percent consensus. Excluding food and energy, core PPI increased 2.8 percent, also below expectations. The data, released by the U.S. Bureau of Labor Statistics, signaled moderating pipeline inflation and supported bets that the Federal Reserve may begin trimming rates in coming months.

Bond markets reacted immediately. The benchmark 10-year Treasury yield fell three basis points to 4.06 percent, providing an additional tailwind to equities, particularly interest-sensitive technology shares.

Corporate Movers and Global Backdrop

Oracle shares surged 37 percent after the company issued an aggressive outlook for its cloud division, citing robust demand for artificial-intelligence infrastructure. The jump helped lift the broader technology sector and contributed significantly to the S&P 500’s record reading.

Elsewhere, risk appetite was tempered by geopolitical tension in Eastern Europe. Poland reported shooting down drones that crossed its airspace during Russia’s latest strike on Ukraine, calling the incident an “act of aggression.” While the event did not derail the day’s rally, it underscored persistent geopolitical risks.

In Asia, China’s deflationary pressures persisted. August consumer prices declined 0.4 percent year over year— the steepest drop in six months—while producer prices fell 2.9 percent, marking a 35-month streak of annual declines. The figures fueled concerns about the strength of the world’s second-largest economy and its impact on global growth.

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Additional Economic Indicators

U.S. housing data offered mixed signals. Mortgage Bankers Association figures showed total applications rising 9.2 percent in the week ended Sept. 5. Purchase applications gained 6.6 percent, and refinancing activity jumped 12.2 percent as the average 30-year fixed rate slid 15 basis points to an 11-month low of 6.49 percent.

Investors now turn to Thursday’s Consumer Price Index. Economists surveyed expect headline CPI to accelerate to 2.9 percent year over year, up from July’s 2.7 percent, while core CPI is projected to hold at 3.1 percent. Weekly jobless claims, also due Thursday, are seen falling to 234,000. On Friday, the University of Michigan’s preliminary September consumer sentiment reading is forecast at 58.0, slightly below August.

Market participants will continue monitoring trade developments and any shifts in tariff policy that could influence inflation and corporate earnings in the weeks ahead.

For more insight into positioning portfolios amid shifting monetary policy, see our recent guide on long-term strategy within the Investing for the Future section.

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