Wall Street reached another milestone Thursday as the S&P 500 closed at a record high after softer US producer inflation eased fears of another Federal Reserve rate increase. Technology shares helped drive the Nasdaq higher as investors reassessed the Fed rate outlook ahead of its September meeting.
S&P 500 high extends Wall Street rally
The S&P 500 gained 0.65% on August 13 to finish at a record 7,798.99, extending its 2026 advance to about 14%. The Nasdaq Composite climbed 0.81% to 26,803.03, while the Dow Jones Industrial Average added 0.13% to close at 53,839.99.
Technology shares provided important support. Sandisk surged 13.7%, Micron Technology advanced 4.2%, Microsoft rose 1% and Meta Platforms gained 2.8%. Communication services and real estate were also among the stronger S&P 500 sectors.
The gains came as investors responded to inflation data that reduced some of the pressure on policymakers to tighten monetary policy again.
US PPI data shows wholesale inflation cooling
The US Bureau of Labor Statistics reported that the Producer Price Index for final demand was unchanged in July after declining a revised 0.1% in June. Economists had expected prices to increase during the month.
Producer prices rose 4.7% over the 12 months through July, slowing from 5.5% in June. Goods prices dropped 0.7%, while prices for final demand services increased 0.2%.
The PPI tracks changes in prices received by domestic producers and can provide clues about inflationary pressures before some costs reach consumers. The July report therefore offered markets another indication that price pressures may be easing.
Consumer inflation also moderated. The Consumer Price Index rose 3.4% over the 12 months ending in July, down from 3.5% in June, according to BLS data.
Fed rate outlook shifts after inflation reports
The combination of softer producer prices and moderating consumer inflation reduced expectations for an interest rate increase at the Federal Reserve's September meeting.
During Thursday trading, markets priced the probability of a September rate hike at around 35%, down from roughly 55% a week earlier. Later market pricing cited by Reuters indicated about a 67.6% probability that the Fed would leave rates unchanged.
The Federal Open Market Committee held its benchmark federal funds rate at 3.50% to 3.75% on July 29. The decision was not unanimous: three policymakers preferred a quarter-point increase, underscoring continuing concern about inflation.
Nasdaq rally gets boost from technology stocks
Technology and AI-related optimism added momentum to the Nasdaq rally as investors continued to favour companies positioned to benefit from heavy spending on artificial intelligence infrastructure.
That enthusiasm does not remove the risks facing markets. Inflation remains above the Federal Reserve's 2% objective, and policymakers have made clear that future decisions will depend on incoming economic data.
For investors, however, Thursday delivered a favorable combination: wholesale inflation came in softer than expected, expectations for an immediate Fed hike declined and technology shares maintained their momentum.
The result was another Wall Street record high. Whether the rally can continue will now depend on upcoming economic data, corporate earnings and evidence that inflation is moving sustainably toward the Fed's target.
