NEW YORK: Wall Street’s main indexes advanced on Thursday after the latest producer prices data led to a lowering in inflation forecasts, while the prospect of Russia-Ukraine peace talks prompted some risk-taking among investors.
US producer prices increased solidly in January, offering more evidence that inflation was picking up again and strengthening markets’ view that the Federal Reserve would not be cutting interest rates before the second half of 2025.
However, economists estimated that the core PCE price index rose 0.3% in January after adding 0.2% in December, much lower than the 0.5% gain some had forecast following the CPI data.
“The PPI report was hot, but probably lifted by temporary factors and residual seasonality,” said Bill Adams, chief economist for Comerica Bank.
“It also saw flat or negative readings on most types of healthcare services, which points to a cooler core PCE inflation report for January than the month’s core CPI.”
Portfolio management fees, healthcare, and airline fares are among components that go into the calculation of the core Personal Consumption Expenditures Price Index, which will be released later this month.
Traders currently price in a solitary 25-basis-point rate cut from the central bank this year, although the Fed is not expected to make a move until September, according to the CME’s FedWatch Tool.
A January consumer price index reading on Wednesday showed the highest increase in prices in nearly a year-and-a-half.
Fed Chair Jerome Powell said on Wednesday, his second day of testimony to Congress, that the CPI data was further evidence the central bank’s battle with rising prices was not finished.
The number of Americans filing new applications for unemployment benefits decreased last week, another report showed.
Meanwhile, US President Donald Trump said Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy had expressed a desire for peace in separate phone conversations with him on Wednesday.
He also posted on his social media platform that he would detail the latest in a barrage of tariffs on imports to the US that he has unveiled since taking office, in a press conference at 1 p.m. (1800 GMT).
At 11:35 a.m. ET, the Dow Jones Industrial Average rose 136.52 points, or 0.31%, to 44,505.08, the S&P 500 gained 33.83 points, or 0.56%, to 6,085.80, and the Nasdaq Composite gained 178.48 points, or 0.91%, to 19,828.43.
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