Stocks Surge to Record Highs on Fed Rate Cut Outlook

Stock indexes closed higher on Thursday, with the S&P 500, Dow Jones, and Nasdaq 100 all reaching record highs. This rally followed expected Aug CPI data and a surge in jobless claims. Markets now expect Fed rate cuts, with a 100% chance of a -25 bp cut in September and a 97% chance of another cut in October.

US weekly jobless claims rose unexpectedly to a 3.75-year high, while Aug CPI met expectations. The markets anticipate more rate cuts, with a 72 bp cut in the federal funds rate by year-end. Focus remains on trade news, with the upcoming FOMC meeting expected to result in a -25 bp rate cut.

Overseas markets settled higher, with the Euro Stoxx 50 up +0.47%, Shanghai Composite up +1.65%, and Japan’s Nikkei up +1.22%. Interest rates fell, with the 10-year T-note yield dropping to a 5-month low of 3.99%. Concerns over Fed independence impacted T-note prices.

The ECB kept rates unchanged, citing stable inflation around the 2% target. The Eurozone’s GDP forecast was raised, signaling growth balance. Semiconductor stocks like Micron Technology (MU) and Lam Research (LRCX) rose after Citigroup’s price target increase. Home builders also saw gains due to lower mortgage rates.