The S&P 500 reached a new peak before relinquishing some of those gains on Wednesday, following an unexpected decline in wholesale prices. This development is seen as favorable by investors advocating for a Federal Reserve rate cut next week to stimulate economic growth. The broad market index recorded an increase of 0.1% in its latest measurement. It had increased approximately 0.7% at its highest point to 6,555.97. The Nasdaq Composite experienced a decline of 0.2%, although it had previously reached an all-time intraday high before this retracement.

The Dow Jones Industrial Average experienced a decline of 322 points, equivalent to 0.7%, primarily influenced by a drop in Apple shares following a lackluster response to the latest iPhone announcement from investors. By the conclusion of the session, the majority of the upward movement had dissipated, with Oracle and stocks associated with artificial intelligence recording the most significant increases. In the S&P 500, the number of losers outpaced the winners. Sentiment experienced an uptick following the recent producer price index report, which indicated a 0.1% decline in wholesale prices for August. Economists surveyed by Dow Jones projected a 0.3% increase. Core PPI, excluding food and energy prices, also experienced a decline of 0.1%, contrasting with the consensus expectation of 0.3%. The report indicates a favorable trend as we approach Thursday’s anticipated consumer price index reading, suggesting that inflation within the U.S. economy is moderating. Analysts anticipate that the Consumer Price Index report will indicate monthly growth of 0.3%. This encompasses the headline index along with the core measure that omits the fluctuating prices of food and energy.

Should this scenario unfold, the annual headline CPI rate would rise to 2.9%, while the core reading is anticipated to remain steady at 3.1%.  Should the figures align with these projections, the Federal Reserve may have the capacity to implement and additional rate cut during its September meeting. Market participants are currently exhibiting a strong consensus that the Federal Reserve will implement a reduction of at least 25 basis points. They also raised their expectations after the PPI data, anticipating that the central bank might implement a more substantial reduction in rates, by 50 basis points, or a half percentage point. “With the PPI surprising to the downside, and the employment data indicating significantly greater softness than anticipated, this suggests a potential justification for the Fed to implement a 50 basis point cut,” Stovall. “The objective is to avoid being perceived as sluggish, as characterized by the president regarding Fed Chair Powell, while striving to at least match or surpass the overarching trend of weakening.”

“That could, I think, certainly stimulate activity in the market between now and the end of the year,” the chief investment strategist added. Oracle shares exhibited strong performance following the report from the established technology firm, which indicated that multicloud database revenue from Amazon, Google, and Microsoft surged by an impressive 1,529% in the most recent quarter, driven by the increasing demand for AI servers. Investors expressed optimism regarding the company’s positive outlook for its cloud segment, despite the fact that its most recent earnings did not meet expectations. Oracle anticipates cloud infrastructure revenue reaching $144 billion in the 2030 fiscal year, marking a significant rise from $10.3 billion in fiscal 2025. Nvidia and AMD experienced upward movement, as investors seemingly re-engaged with the AI sector.