The U.S. stock market saw a slight increase in evening trading as a result of lower interest rate expectations due to cooling consumer inflation in July. This trend was further reinforced by softer-than-expected inflation readings earlier in the week, which fueled speculation that the Federal Reserve would start cutting interest rates starting in September.
Investors reacted positively to the news of a slower inflation growth rate, with the S&P 500 Futures rising by 0.1%, Nasdaq 100 Futures rising by 0.1%, and Dow Jones Futures rising by 0.1%. The drop in the Consumer Price Index (CPI) to a 2.9% annual rate in July, along with a 0.3% month-on-month growth, led traders to believe that an interest rate cut was becoming more likely in the near future.
The expectations of lower interest rates were seen as favorable for the stock market, as it would increase liquidity available for investment in various sectors. Economic growth typically improves with lower interest rates, which creates a positive environment for stock market growth. These factors helped push the Wall Street indexes to two-week highs, reflecting a rebound from previous market volatility.
The S&P 500 rose by 0.4% to 5,455.21 points, while the NASDAQ Composite saw a slight increase to 17,189.05 points. The Dow Jones Industrial Average also experienced a 0.6% increase to 40,008.39 points. Expectations of lower interest rates led to a shift in investment flows from technology stocks to more economically sensitive sectors, with value stocks seeing a rise in investor interest.
The market will be closely watching upcoming industrial production and retail sales readings, which are expected to provide further insights into the state of the economy. These indicators will play a crucial role in shaping investor sentiment and influencing future market trends.