Stocks soared to fresh highs on Thursday after the latest reading on consumer inflation boosted outlooks that the Federal Reserve may cut interest rates next week.
The Dow Jones Industrial Average (NYSE: DIA) soared over 600 points to close at 46,108.00 on Thursday, while the S&P 500 Index (NYSE: SPY) and the Nasdaq Composite (NASDAQ: QQQ) each climbed about 0.77% to settle at 6,587.47 and 22,043.07, respectively. All three major market averages each set new intraday and closing all-time highs.
Moving markets, August's consumer price index (CPI) reading came in hotter-than-expected on a monthly basis, but matched economist expectations year-over-year. Wall Street took this reading, alongside the 0.1% decline in producer prices last month, as a sign the central bank will have a clear path to issue its first interest rate cut since December next week.
The CPI index rose to a seasonally adjusted 0.4% for the month in August, the Bureau of Labor Statistics reported on Thursday, bringing the annual inflation rate to 2.9% -- the index's highest reading since January. Excluding food and energy prices, core CPI rose 0.3% month-to-month in August, pushing the annual rate to 3.1% -- both came in-line with forecasts from Dow Jones.
Elsewhere on the economic front, the labor market showed more signs of softening on Thursday, with first-time unemployment claims unexpectedly climbing to a seasonally adjusted 263,000 for the week ended Sept. 6, the Labor Department reports. The new claims level was the highest in nearly four years.
Wells Fargo Investment Institute strategist Scott Wren wrote in a report released Thursday that the current U.S. economic picture signals that companies are no longer hiring new positions, not also are not firing their existing employees.
"With the negative revisions to the prior month's job gains taken into account, the domestic labor market is, at the very least, slowing noticeably," he wrote. "But monthly job-creation numbers are not the only statistic to track. In most past cycles, initial jobless claims, reported every Thursday morning, have provided a good leading indicator for the likely path of domestic employment."
"History shows that in decades past, even in very good economic times, initial jobless claims would frequently come in at levels above 300,000," Wren continued. "In this cycle, the current relatively steady level of claims means businesses are holding on to their employees. The bottom line, right now, appears to be that companies are not hiring but they are also not firing."
For Friday, market participants will turn their attention to the University of Michigan's preliminary consumer sentiment reading for September, alongside earnings reports from companies including Adobe (NASDAQ: ADBE), Kroger (NYSE: KR) and RH (NYSE: RH).