U.S. stocks moved mostly higher on Thursday, with the S&P 500 reaching a new record high after softer-than-expected producer inflation data reduced expectations for another Federal Reserve interest rate increase.
Falling Treasury yields supported rate-sensitive technology stocks, while a decline in oil prices also helped improve overall market sentiment.
S&P 500 Reaches Fresh All-Time High
At 11:25 ET (15:25 GMT), the S&P 500 gained 0.5% to 7,790.55, after reaching a new intraday record of 7,816.79 earlier in the session.
The technology-heavy Nasdaq Composite climbed 0.7% to 26,786.47, supported by strength across the technology sector.
Meanwhile, the Dow Jones Industrial Average slipped 0.1% to 53,697.87, underperforming the broader market.
U.S. equities had also finished mostly higher in the previous session. The S&P 500 gained 0.3%, the Nasdaq advanced 0.5%, while the Dow edged slightly lower.
Technology Stocks Continue to Support Wall Street
Technology shares remained an important source of strength for the broader market, with investor enthusiasm around artificial intelligence continuing to support companies linked to the AI investment boom.
Demand for computing infrastructure, networking equipment and advanced semiconductors has remained particularly strong as major technology companies continue investing heavily in artificial intelligence.
This trend has helped technology stocks play a major role in pushing the S&P 500 and Nasdaq higher.
Cisco Shares Fall Despite Strong Results
Cisco Systems shares declined on Thursday even though the networking equipment company reported strong quarterly results.
Analysts noted that investor expectations were already extremely high heading into the earnings release. Cisco shares had gained more than 60% since the beginning of the year, partly reflecting optimism surrounding demand for infrastructure required to support AI systems.
CEO Chuck Robbins said Cisco is experiencing exceptionally strong demand across its product portfolio.
The company has received billions of dollars in orders from large technology companies investing aggressively in artificial intelligence infrastructure.
Robbins described the current AI expansion as the fastest-moving technology transition Cisco has experienced.
Applied Materials Earnings in Focus
Investors were also awaiting results from Applied Materials, which was scheduled to report after Thursday’s closing bell.
Analysts expected the semiconductor equipment company to report adjusted fiscal third-quarter earnings of $3.42 per share on revenue of approximately $9.02 billion.
The continued expansion of artificial intelligence has created strong demand for increasingly advanced semiconductor manufacturing equipment.
AI processors require more sophisticated production techniques and greater quantities of silicon wafers, providing opportunities for equipment suppliers such as Applied Materials.
U.S. Producer Inflation Comes in Softer Than Expected
The latest market rally was also supported by encouraging inflation data.
According to the Bureau of Labor Statistics, the headline Producer Price Index was unchanged month-on-month in July.
On an annual basis, producer prices increased 4.7%, slowing from 5.5% in June.
Both figures came in below economists’ expectations.
In June, headline PPI had declined 0.1% on a monthly basis.
Core PPI Also Shows Cooling Price Pressures
Core producer inflation, which excludes more volatile components, increased 0.2% month-on-month in July, below expectations for a 0.3% rise.
On an annual basis, core PPI increased 4.2%, matching forecasts and slowing from the 4.7% rate recorded in June.
The moderation in producer inflation added to hopes that underlying price pressures are gradually easing across the U.S. economy.
Fed Rate-Hike Expectations Decline
The softer PPI figures came one day after July’s Consumer Price Index report broadly matched expectations.
Together, the CPI and PPI data encouraged investors to reduce expectations for another Federal Reserve rate hike.
Lower rate expectations contributed to a decline in Treasury yields, providing additional support for technology and other growth-oriented stocks.
Technology companies can be particularly sensitive to interest rates because lower yields can increase the present value investors assign to their expected future earnings.
Fed’s Preferred Inflation Gauge Comes Next
With both July CPI and PPI figures now available, economists will be able to refine forecasts for the upcoming core Personal Consumption Expenditures Price Index.
Core PCE is closely monitored because it is one of the Federal Reserve’s preferred measures of underlying inflation.
The report could provide additional clues about whether inflation is cooling quickly enough for policymakers to keep interest rates unchanged.
For now, softer producer inflation, falling Treasury yields and continued enthusiasm surrounding artificial intelligence have helped push the S&P 500 to another record high, while investors continue to assess the outlook for Federal Reserve policy and corporate earnings.
