The consumer price index showed core inflation held steady in August, but initial claims for jobless benefits surged. The Fed is a lock to cut its key interest rate next week, but market expectations of a supersized rate cut barely rose. Still, the deteriorating labor market could influence Fed projections of future rate cuts, which will be released with next Wednesday's policy update.
The S&P 500 opened modestly higher after CPI data in early Thursday stock market action, after the large-cap index finished at a record closing high on Wednesday. Oracle continues to rise after shocking analysts with its surging data-center revenue backlog fueled by AI. Nvidia gained more ground after flashing an early entry in the prior session.
10:51 a.m. ET
Stocks Hit Record Highs, Yields Fall
The major indexes all hit record highs following the CPI and jobless claims data. with the Dow Jones up 1.2%, the S&P 500 0.7% and the Nasdaq 0.6%.
The 10-year Treasury yield dipped to just above 4%.
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9:09 a.m. ET
Jobless Claims Spiked In Texas
New claims for jobless benefits surged by 15,304 in Texas last week, nearly doubling the prior week's total of 16,604. That data is unadjusted for seasonal factors. Overall jobless claims rose 7,869 from the prior week, on an unadjusted basis.
Labor Department seasonal adjustment predicted a 13,004 decrease in claims, based on recent history.
Nancy Vanden Houten, lead U.S. economist at Oxford Economics, advised "caution against reading too much into the latest week's increase since it was driven by a sharp rise in claims in just one state."
9:03 a.m. ET
Trump Tariffs Spike Prices Of . . . Sewing Machines
The CPI inflation data does show a few major prices increases that appear to be related to Trump tariffs. The prices of sewing machines, fabric and supplies jumped 9.1% on the month, the biggest increase since August 2020.
The price of televisions rose 2.5%, the most since August 2021. Jewelry prices jumped 6.8%, the biggest monthly increase on record.
8:53 a.m. ET
Fed Rate-Cut Odds Not Moving Much
The odds of a half-point Fed rate cut next Wednesday only inched higher, despite the jump in initial claims. Markets now see 12% odds of a half-point cut, though there no doubt that the Fed will cut by at least 25 basis points. However, odds jumped to 92% that the Fed will cut by a cumulative 50 basis points by completion of the Oct. 29 meeting.
8:50 a.m. ET
CPI Inflation Details
Core prices were pretty firm across the board, with core goods prices and nonenergy services prices both up 0.3%. The 0.3% increase in core goods prices was the largest since January. Core goods inflation climbed to 1.5% over the past 12 months, the highest since May 2023.
Higher core goods prices likely reflects some Trump tariff impacts.
8:48 a.m. ET
10-Year Treasury Yield Briefly Undercuts 4%
The 10-year Treasury yield briefly 3.99% following the jobless claims jump. It's now steady at 4.03% after setting fresh five-month lows last week. The two-year yield, more closely tied to Fed rate policy, sank 3 basis points to 3.5%.
S&P 500 futures are up 0.2%, little changed from before the 8:30 a.m. ET economic reports.
8:42 a.m. ET
Initial Claims Surge
New claims for unemployment benefits leapt to 263,000 in the week through Sept. 6, the highest since October 2021. Claims jumped 27,000 from the prior week's revised 236,000 level.
However, continuing claims from those who are still getting benefits because they haven't started a new job, were flat at 1.939 million and have stopped trending higher in recent weeks.
8:41 a.m. ET
Core CPI Steady
The consumer price index rose 0.4% vs. the prior month, slightly more than expected. The year-over-year CPI inflation rate picked up to 2.9%, but as expected.
The core CPI matched forecasts of a 0.3% monthly increase and a steady 3.1% 12-month increase.
CPI Forecast
Economists expect a 0.3% monthly increase for both the overall CPI and the core CPI, which excludes food and energy, according to Econoday. Headline inflation is seen rising to 2.9% from 2.7%, while the core CPI inflation rate is expected to hold at 3.1%.
Today's CPI data will sharpen economists' forecasts for the Fed's primary inflation rate, the core PCE price index, which won't be released until Sept. 26.
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CPI inputs account for about two-thirds of the core PCE price index, while producer price index inputs account for most of the other third. While headline PPI inflation was surprisingly cool in August, the components that feed into the core PCE price index ran on the high side. Ahead of the CPI data, economists expect the core PCE price index to rise 0.3% on the month, higher than the Fed would like.
Initial Jobless Claims
Initial claims for unemployment benefits are expected to dip to 234,000 in the week through Sept. 6, down from 237,000 the prior week. Claims have moved higher recently but remain at pretty modest levels historically.
Fed Rate-Cut Outlook
Ahead of the CPI, markets are pricing in 8% odds of a 50-basis-point rate cut next Wednesday. A quarter-point cut is a lock. Markets currently see 77% odds of a cumulative 50-basis-point rate cut by completion of the Oct. 29 Fed meeting.
For now, odds of 75 basis points in rate cuts over the year's final three meetings are up to 69% from 46% a week ago, ahead of last Friday's gloomy jobs report.
S&P 500
S&P 500 futures rose 0.2% early Thursday. On Wednesday, the S&P 500 rose 0.3% to a new closing high. Year to date, the S&P 500 has climbed 11.1%, having surged 31.1% from its April 8 52-week low.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
