Wall Street Rallies Amid Economic Data and Fed Rate Cut Expectations

Wall Street's major indexes rose following higher-than-expected producer price data, boosting expectations for a Federal Reserve rate cut. Despite weakening economic indicators, investor optimism prevailed. Moderna saw a significant drop in stock due to a bleak revenue forecast, while sectors like communication services, gold miners, and small-cap stocks experienced gains.

Wall Street's main indexes rallied on Thursday as higher-than-expected producer prices data bolstered hopes for a 25-basis point rate cut by the Federal Reserve. The producer price index (PPI) for final demand rose 0.2% in August, surpassing estimates of 0.1%, with the core number increasing by 0.3%, above the forecast of 0.2%.

Initial claims for state unemployment benefits were at 230,000 for the week ended Sept. 7, matching estimates. Chuck Carlson, CEO of Horizon Investment Services, noted that investor confidence is growing amid signals of cooling inflation and a tendency to buy during market declines.

Weakening employment and economic growth data had previously spurred expectations for a larger 50-basis point rate cut. However, those hopes dimmed after Wednesday's inflation report, with CME's FedWatch Tool now indicating a 75% chance of a 25-basis point cut during the Fed's Sept. 17-18 meeting.

As of 2:11 p.m. ET, the Dow Jones Industrial Average rose by 162.35 points to 41,024.06. The S&P 500 gained 39.05 points, and the Nasdaq Composite climbed 180.07 points. Most S&P 500 sectors were up, led by communication services, while real estate slightly declined.

The Russell 2000, sensitive to economic shifts, led gains with a 1.4% rally. Carlson attributed this to bargain hunting and rate sensitivity of small caps. In contrast, Moderna's stock plummeted 11.5% after a gloomy revenue forecast. Micron Technology fell by 3% following a downgrade by Exane BNP Paribas.

Kroger shares surged 6% after outperforming second-quarter estimates and raising its annual sales forecast. Gold miners also saw a boost as spot gold reached a record high. Warner Bros Discovery and Charter Communications shares jumped on news of an ad-supported streaming collaboration.

Advancing issues outnumbered decliners significantly on the NYSE and Nasdaq, with multiple stocks recording new highs and lows, reflecting a predominantly optimistic market sentiment.

(With inputs from agencies.)