4:20pm: Market shrugs off inflation concerns
US stocks closed higher on Thursday, with the S&P 500 notching a new record high.
The benchmark index climbed 1% or 63 points to finish at 6,115, marking a new all-time high. The Nasdaq followed closely, surging 1.5% or 296 points to close at 19,946. The Dow Jones also made substantial gains, rising 0.8% or 343 points to end the session at 44,711.
The market rally came after the release of the Producer Price Index (PPI) data, which showed wholesale inflation slowed in January, offering a counterpoint to Wednesday's hotter-than-expected consumer inflation print. The PPI rose 0.4% last month, suggesting a slight deceleration from December's 0.5% increase.
This data potentially complicates the Federal Reserve's path toward a neutral interest rate.
3:45pm: S&P nearing record territory
Adam Turnquist of LPL Financial notes that equity markets have started 2025 strong, with the S&P 500 up over 3% for the year despite various headline risks. The index even reached a record high last month. He also highlights increasing dispersion in returns within the index, suggesting greater opportunities for active management.
"The S&P 500 is closing in on record-high territory. Underneath the surface, stock returns have become more dispersed, resulting in historically low correlations among constituents," Turnquist noted.
"This backdrop provides more alpha-generating opportunities for active management."
2:43: Trump unveils tariff plans
US President Donald Trump has announced a new plan to impose reciprocal tariffs on countries that charge higher duties on American imports, a move that could reshape global trade relations.
Speaking at the Oval Office on Thursday, Trump said the tariffs would be customized for each country to ensure fairness.
“Whatever countries charge the United States, we will charge them,” Trump stated, adding that many US trading partners impose significantly higher tariffs.
The administration will also consider value-added taxes, subsidies, and regulations when determining duties.
While the tariffs are not immediate, they could take effect within weeks as Trump’s trade team assesses the most significant trade imbalances.
Read more here.
1:40pm: Negotiating tactic
Despite stronger CPI and PPI readings, U.S. markets have shown remarkable resilience, avoiding a selloff, said Chris Beauchamp, Chief Market Analyst at online trading platform IG.
"Trump’s announcement of more tariffs failed to have much of an impact either, since they are delayed until the beginning of April," Beauchamp commented.
"Investors have been strengthened in their belief that the tough talk on this front is more of a negotiating tactic.”
12:35pm: Tariff announcement looms
The Nasdaq is leading the major indexes higher in midday trading, up 0.8%. The S&P 500 is following with a 0.5% gain, while the Dow Jones is up 0.3%.
This positive momentum comes ahead of an expected announcement on tariffs by President Donald Trump.
Several companies are seeing significant gains after reporting better-than-expected quarterly profits. MGM Resorts International is among the top performers, jumping 14.7%. Other notable gainers include GE HealthCare Technologies, up 8%, Molson Coors Beverage, rising 6.6%, and Robinhood Markets, which has surged 10.9%.
The market's upward movement is occurring despite ongoing concerns about inflation and potential policy changes. Investors are likely to remain focused on Federal Reserve Chairman Jerome Powell's upcoming semi-annual monetary testimony to Congress and the release of the Consumer Price Index (CPI) later this week.
11:25am: Fed on hold
Bill Adams, Chief Economist for Comerica Bank, commented on the January Producer Price Index (PPI), which rose more than expected, with a 0.4% increase compared to the 0.3% forecast.
The rise was driven by higher prices for diesel, petroleum, eggs, and hotel rooms. However, a drop in healthcare services prices suggests that core Personal Consumption Expenditures (PCE) inflation for January won't be as high as the Consumer Price Index (CPI) or PPI.
Despite the hot PPI report, Adams maintains expectations that the Federal Reserve will hold interest rates steady in the near term and may cut rates by 0.25% by the end of 2025, assuming inflationary pressures, particularly in housing, continue to ease.
"The PPI report doesn’t tell the Fed much new," Adams said.
"They are on hold near-term, and are likely though not assured to make a single rate cut in 2025 if prices with lots of momentum like housing and residential rents continue to cool and offset upward pressures on inflation from post-election changes to economic policy."
9.55am: Wall Street opens higher
Wall Street stocks have opened higher, following some encouraging deep dives into wholesale price data by analysts and economists.
The Nasdaq Composite is leading the way, up 0.5%, with the S&P 500 rising 0.25% and the Dow Jones 0.1%, while the small- and mid-cap Russell 2000 has added 0.4%.
Top risers on the S&P 500 were MGM Resorts International (NYSE:MGM), Tyler Technologies, Caesars Entertainment and Intel Corp.
AppLovin Corp (NASDAQ:APP) topped the Nasdaq 100 leaderboard, up 33% after beating Wall Street's fourth-quarter earnings estimates and raising guidance for the year.
9.20am: PPI suggests disinflation still on track
While the US PPI reading was higher than expected, it is still consistent with a reading of 2.6% in core PCE inflation, down 0.2pp from December, so good news for the Federal Reserve's aims of cutting inflation, says Samuel Tombs, chief US economist at Pantheon Macroeconomics.
The headline January PPI rose by 0.4%, above the consensus 0.3%, while core PPI increased 0.3%, largely in line with expectations.
Tombs calculates from the PPI and CPI data that the core PCE deflator, one of the Fed's favourite inflation measures, increased by 0.28% in January, much less than the 0.50% increase a year ago.
"In the round, then, we think that PPI components collectively made a small negative contribution to the month-to-month change in the core PCE deflator in January," he says, and more confidently that core PCE inflation fell to 2.6%, from 2.8% in December.
"The Fed still can declare, therefore, that progress in returning inflation to its 2% objective is still being made."
"Meanwhile, components of the PPI that reliably lead the CPI data paint a reassuring picture," he adds, with PPI inflation for durable goods falling and PPI inflation for services prices also consistent with a further fall ahead in CPI inflation for core services.
8.46am: US PPI inflation also comes in hot
US factory gate prices for January have also came in hotter than expected.
For some reason this has lifted stock futures, with interest-rate futures gaining, which reflects rising bets on a Fed rate cut in July or September.
The producer price index was up 0.4% month on month in January, higher than the 0.3% consensus estimate.
PPI final demand was up 3.5% year on year, again higher than the 3.3% expected.
Core PPI was up 0.3% on the month and 3.6% on the year, versus 0.3% and 3.3% expected, respectively.
7.45am: US stock futures flat
US stock index futures were sitting on their hands ahead of Wall Street's opening bell on Thursday, following a mixed but mostly lower session the day before on the back of a hot CPI inflation reading.
S&P 500 futures are just below flat, with Nasdaq futures just below flat and Dow Jones futures just above.
Yesterday, the Nasdaq ended flat after an initial drop on the back of the inflation release, with the S&P closing 0.3% lower and the Dow down 0.5%.
The inflation data triggered a sharp sell-off, while the dollar soared and bonds tumbled, sending yields higher.
Today, US Treasury yields are easing lower again, though are still higher than they were a month ago for many, or two-week highs for some.
Today the focus moves to the producer prices index (PPI), a measure of wholesale inflation, says market analyst David Morrison at Trade Nation.
Kenny Polcari at Slatestone says the move in bonds suggests that the Fed "may be boxed into a corner – unable to really cut rates this year at all and in fact – the rumor yesterday was that we could see a rate HIKE rather than a CUT this year".
He notes that the Fed's rate-cutting last year now seems rather premature, and notes that the January PPI report is also expected to tick up a bit,
Federal Reserve chair Jerome Powell testified in Washington for the second day, observing that there was still work to do as far as inflation was concerned, with the CPI helping justify the Fed’s decision to hold off from a rate cut last month.
Powell continues to insist that the Fed is in no hurry to loosen monetary policy further, with markets expecting just one 25 bps rate cut this year, according to the CME’s FedWatch Tool.
Across the pond, European stocks are romping higher on Ukraine peace hopes, with Germany's DAX and France's CAC both up well over 1%, though London's FTSE is down as oil prices and bonds weigh.
"The news that President Trump would meet Russian President Putin in Saudi Arabia to agree an end to the war in Ukraine calmed markets late on Wednesday after the CPI shock," said market analyst Kathleen Brooks at XTB.
"There is some concern that the US rather than Ukraine is leading the negotiations, and the US defense secretary said that Ukraine won’t get back all of the territory that Russia has captured, and he also reiterated that the US does not agree to NATO membership for Ukraine."