The S&P 500, Nasdaq 100 and Dow Jones all hit new all-time highs as investors continue to bet on the strength of corporates despite fresh data pointing to an unwelcome resurgence in inflation.
- The SPY ETF is trading at record highs. Check the chart here.
July's consumer price index held steady at 2.7% year-over-year — slightly below expectations — offering a brief sense of relief.
But the real inflation shock came from the wholesale side on Thursday.
The Producer Price Index, a key gauge of price pressures at the factory and distribution level, jumped 0.9% month-over-month. That’s the sharpest increase in three years. It pushed the annual rate to 3.3%, well above expectations of 2.7%.
Indeed, the producer inflation reading is hotter-than-expected. Still, markets expect the Federal Reserve to cut interest rates by a quarter of a percentage point in September.
Secretary of the Treasury Scott Bessent has even called for more aggressive action, saying rates should be 150–175 basis points lower and hinting that a half-point cut could be on the table next month.
Consumers, meanwhile, are perceiving the pinch. The University of Michigan's August consumer sentiment survey revealed a decline in household confidence, alongside rising inflation expectations.
Americans now expect prices to increase 4.9% over the next year. That’s up from 4.5% in July — and 3.9% over a five-year horizon. Compare that with the 3.4% previously, which complicates the Fed's interest-rate path.
On the corporate front, the White House is reportedly in talks with Intel Corp. (NASDAQ:INTC) over a potential government stake. The deal, still under negotiation, would use funding from the CHIPS Act, with details on the size and valuation yet to be finalized.
The prospect of a government investment ignited a rally in Intel shares, which soared nearly 25% for the week — the company's strongest weekly gain since January 2000.
UnitedHealth Group Inc. (NYSE:UNH) also drew attention after Warren Buffett‘s Berkshire Hathaway disclosed a new five-million-share stake in the insurer. The move came after UnitedHealth's stock suffered a year-to-date drop of more than 40%, prompting dip buyers to speculate on a recovery.
Next week, Fed Chair Jerome Powell's remarks at the annual Jackson Hole Economic Symposium may offer fresh insight into whether policymakers will opt for a cautious quarter-point cut or keep rates on hold.
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