U.S. stocks rose and Treasury bond yields fell sharply on Thursday after the Bureau of Labor Statistics reported that the Producer Price Index was unchanged from June to July and fell from 5.5% to 4.7% on an annual basis, a result that fueled investor optimism about the Federal Reserve's next rate decision.
Stocks climb, bond yields fall after July PPI shows prices flat month-over-month
U.S. stocks rose and Treasury bond yields fell sharply on Thursday after the Bureau of Labor Statistics reported that the Producer Price Index was unchanged from June to July and fell from 5.5% to 4.7% on an annual basis, a result that fueled investor optimism about the Federal Reserve's next rate decision.
The S&P 500 rose 0.6% and the Nasdaq Composite jumped 0.8% in early trading, with both the S&P 500 and the Russell 2000 hitting new all-time highs. The Russell 2000, which tracks small and medium-sized companies, also increased.
U.S. Treasury yields declined alongside the equity gains. The 10-year Treasury yield fell to 4.61%, its lowest level since the prior week, while the 30-year Treasury yield dropped to around 5.18% after having risen to nearly 5.3% following the Federal Reserve's most recent policy meeting.
The falling yields could provide short-term relief to borrowers. Before Thursday's moves, the average 30-year fixed-rate mortgage stood at 6.74%, near its highest level of the year. Later Thursday, the U.S. Treasury Department was scheduled to auction $25 billion worth of 30-year bonds at what could be their highest interest rate in a quarter of a century.
Following the PPI release, Wall Street economists began projecting that core PCE — the Federal Reserve's preferred inflation measure, due August 26 — would likely rise by only around 0.2% in July. By mid-morning, bond traders had pulled back from bets that the Fed would raise rates this year. The Fed's policy-setting committee is scheduled to make its next interest rate decision in mid-September.
- The source does not state the exact date or calendar week to which 'last week' refers when describing the 10-year yield's prior low.
- The source does not identify the other two Fed officials who dissented at the most recent interest rate meeting.
- The source does not state the current federal funds rate target range.
- The source does not state what the core PCE reading was in June for comparison with the projected July figure.
- The source does not provide independent verification of the economists' core PCE projections.
- The source does not state the result of the $25 billion 30-year Treasury bond auction referenced as occurring later Thursday.