U.S. Stocks Surge Amid Hopes for Federal Reserve Rate Cut

U.S. stocks rallied to near two-week highs fueled by softer producer prices data, leading to expectations of an interest rate cut by the Federal Reserve. Mega-cap and growth stocks, notably Nvidia, saw significant gains. The Philadelphia SE Semiconductor Index rose 2.8%. Investors remain optimistic despite recent volatility.

U.S. stocks climbed to close to a two-week high on Tuesday, as softer producer prices data bolstered expectations for a potential interest rate cut by the Federal Reserve in September. Major growth and mega-cap stocks, with Nvidia at the forefront, surged significantly, gaining over 5%. The Philadelphia SE Semiconductor Index also enjoyed a strong performance, rising 2.8% to approach a two-week high.

Data revealed U.S. producer prices increased less than anticipated in July, with a moderate rise in goods costs counterbalanced by cheaper services. This resulted in a 2.2% increase over the past 12 months, down from 2.7% in June. "It appears markets are readjusting to normalcy with tech stocks leading the resurgence following the lower PPI data," noted Chris Beauchamp, chief market analyst at IG, reflecting investor optimism.

Consequently, the dollar and Treasury yields fell post-data release, and CME's FedWatch Tool now indicates a 55% probability of a 50-basis-point rate cut by the U.S. central bank. Market participants eagerly await July's consumer price index figures and retail sales data later in the week to solidify their expectations of a significant rate cut.

(With inputs from agencies.)