Stocks Rally on Favorable PPI Report and Declining Crude Oil Prices
The US stock market is experiencing support due to a favorable PPI report. The S&P 500 Index ($SPX) (SPY) is up +0.57%, while the Dow Jones Industrial Average ($DOWI) (DIA) is up +0.04% and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.22%. The 10-year T-note yield has declined by -7.2 bp to 4.621%, and the markets are now discounting a 35% chance of a +25 bp rate hike at the next FOMC meeting.
The PPI report showed that the July US final-demand PPI was unchanged m/m but up +4.7% y/y, which is weaker than market expectations. However, this decline in inflation has boosted T-note prices and supported the stock market. The drop in crude oil prices by more than -1% has also contributed to the positive sentiment.
US tech stocks have seen some support from an overnight +3.6% rally in the South Korean Kospi index, driven in part by a more than +5% rally in Samsung Electronics and chip-maker SK Hynix. However, US tech stocks were undercut today by a -8% drop in Cisco Systems after disappointing guidance.
The outlook for strong Q2 earnings is also providing support to the stock market. The S&P 500 is tracking for earnings growth of almost 32% in Q2, with AI spending expected to account for most of earnings.