SPX: S&P 500 Gains 0.8% as Hotter Producer Inflation Fails to Dampen Risk Appetite

Producer price index rose more than expected in August but this didn’t stop the broad-based index from gobbling up its fourth day of winnings in a row.

• The S&P 500 pressed higher on Thursday, spinning another impressive turnaround following more mixed data on the inflation front. The broad-based Wall Street average added 0.8% on the day but not without a slump early on in the session. Traders dumped stocks after a hotter-than-expected producer price index (PPI) flashed some warning signs. The report showed the core prices at which producers sell their goods increased 0.3% in August from July, topping estimates for a 0.2% pop.
• It wasn’t too bad, though — wholesale prices this year have been more volatile than consumer prices. On an annualized basis, wholesale price growth for August ticked at 1.7% from 2.2% in the previous month. The nuanced picture was suddenly very appealing and investors rushed back in, scooping up their favorite stocks (yes, tech was leading again). The Nasdaq Composite shot higher by 1%.
• With a quiet Friday session and no major news on deck, money managers and retail traders are already mentally leapfrogging to the Federal Reserve’s press conference on September 18. Perhaps the biggest central bank news this year — the Fed is about to trim interest rates with a clip of 25bps or why not even a 50bps cut? Traders now see a 69% chance of a quarter-point interest rate cut. The odds of a half-point trim increased to 31% on Thursday from 14% earlier.