The Stock Market Rose as a Cooler Than Expected PPI Lifted Rate Cut Bets

Stocks surged Wednesday morning after fresh inflation data came in cooler than expected, strengthening expectations for interest rate cuts and prompting bullish revisions from Wall Street strategists on U.S. equities.

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The S&P 500 kicked off the session up 0.5%, lifted by gains in technology and energy names, building on Tuesday’s record close. Oracle Corp. led the charge, jumping after issuing a bold growth forecast for its cloud business. The upbeat projection added to optimism already sparked by Alphabet Inc.’s strong cloud revenue outlook earlier this week.

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Meanwhile, the Nasdaq 100, dominated by tech heavyweights, advanced 0.4% at the open, while the Dow Jones Industrial Average dipped 0.2%, dragged by losses in more traditional sectors.

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The market’s momentum followed a surprise decline in U.S. producer prices for the month the first drop since April. Traders took the reading as a green light for the Federal Reserve to move forward with aggressive rate cuts starting as soon as next week.

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“This report is a real relief,” wrote Adam Crisafulli, founder of Vital Knowledge. “The Fed already had a strong case for easing, but now it looks even more convincing.”

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Even so, expectations remain tempered. Most analysts still see the central bank opting for a quarter-point reduction rather than a bolder move. “The risk is that a 75-basis-point cut would be premature even 50 points could be too much,” Seth Carpenter, Morgan Stanley’s chief global economist, told Bloomberg TV following Wednesday’s PPI release.

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The producer price report also serves as a prelude to Thursday’s highly anticipated consumer price index data, which investors view as a more decisive gauge of inflation. “Think of this as a warm-up before CPI,” said Derek Holt, head of capital markets economics at Scotiabank.

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The backdrop for Fed policy has grown increasingly complicated in recent weeks. Calls for lower rates have intensified following a string of softer labor market reports. On Tuesday, Treasury Secretary Scott Bessent publicly pressed the Fed to pivot its stance. Adding to the tension, a federal judge blocked President Trump’s effort to dismiss Fed Governor Lisa Cook, keeping her in place as policymakers prepare for their September decision.

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Despite political noise and uncertainty around the size of the Fed’s first cut, equity strategists remain constructive on the broader market. Seaport Research Partners became the latest firm to lift its targets for the S&P 500, projecting the benchmark will hit 6,700 by the end of this year and climb to 7,300 by the close of 2026.

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“Technology’s leadership remains intact, and we expect it to drive gains for the foreseeable future,” wrote Jonathan Golub, Seaport’s chief equity strategist, in a note to clients.

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Other major banks have echoed this upbeat tone. Deutsche Bank, Barclays, and Wells Fargo Securities have all raised their year-end forecasts for U.S. equities, citing easing inflation pressures and strong earnings momentum in sectors tied to artificial intelligence, cloud computing, and energy.

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The combination of a softer inflation backdrop, potential Fed easing, and resilient corporate earnings is fueling optimism that the rally has more room to run. While volatility is likely around key data releases and policy decisions, investors appear increasingly confident that the U.S. stock market’s upward trajectory can extend into the final months of the year.

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