Wall St gains as inflation data boosts rate-pause hopes

By Shristi Achar A and Amruta Khandekar

(Reuters) – Wall Street’s main indexes rose on Thursday as a keenly awaited report showed inflation was ebbing, fueling hopes the Federal Reserve could pause its monetary tightening, while Salesforce (NYSE:) shares climbed on the company’s upbeat revenue forecasts.

The Commerce Department report showed the personal consumption expenditures (PCE) price index, considered to be the Fed’s preferred inflation gauge, climbed 3.3% in July, on an annual basis, meeting expectations of a 3.3% rise.

Excluding volatile food and energy components, the core PCE price index rose 4.2% in July, year-on-year, also in line with estimates.

Traders’ bets on a pause in rate hikes at the Fed’s September policy meet remained intact at 88.5%, while their odds for the central bank keeping rates unchanged in November stood at 51%, according to the CME Group’s (NASDAQ:) FedWatch tool.

“You’re seeing inflation really decelerating, which is the narrative that we’ve had for a while now,” said Tony Roth, chief investment officer at Wilmington Trust.

“There’s a lot of data that’s still to come (but) it’s very possible the Fed won’t move in November and that we’re done with rate hikes.”

In a further boost to markets, shares of Salesforce rose 5.1% on upbeat sales forecasts from the cloud-based software provider as it benefits from price hikes and a resilient demand.

The yield on the 10-year Treasury note inched lower, driving major growth stocks including Alphabet (NASDAQ:), Microsoft (NASDAQ:) and Tesla (NASDAQ:) up between 0.2% and 0.6%.

Nine out of the 11 major sectors were in the green, with communication services and information technology leading gains, up 0.4% each.

Keeping investor sentiment in check, the weekly jobless claims for the week ended August 26 fell to 228,000, compared with estimates of 235,000 claims.

The data follows a smaller-than-expected growth in private payrolls on Wednesday that signalled a softening labor market and drove the S&P 500 to a three-week closing high.

The index has fallen 1.4% in August due to declines in the first half of the month on fears of interest rates staying higher for longer.

At 9:41 a.m. ET, the was up 137.35 points, or 0.39%, at 35,027.59, the S&P 500 was up 8.73 points, or 0.19%, at 4,523.60, and the was up 38.44 points, or 0.27%, at 14,057.75.

Among other stocks, Dollar General (NYSE:) slumped 15.8% after the discount retailer cut its annual same-store sales forecast. Peer Dollar Tree (NASDAQ:)’s shares also fell 2.3%.

Victoria’s Secret & Co dropped 4.0% after the company forecast a decline in its third-quarter sales.

Dismal manufacturing data from China sent U.S.-listed shares of Chinese companies JD (NASDAQ:).com and Baidu (NASDAQ:) down 2.7% and 1.8%, respectively.

Advancing issues outnumbered decliners by a 1.69-to-1 ratio on the NYSE and by a 1.49-to-1 ratio on the Nasdaq.

The S&P index recorded nine new 52-week highs and two new lows, while the Nasdaq recorded 33 new highs and 19 new lows.