Stocks Surge as Favorable PPI Report Boosts Treasury Yields

The US stock market rallied on Thursday following a favorable inflation report from the US government. The S&P 500 Index rose by 0.65%, while the Dow Jones Industrial Average increased by 0.13% and the Nasdaq 100 Index gained 1.15%. This uptick in stocks was largely driven by the drop in crude oil prices, which fell more than 2% amid a lack of new US or Iranian military attacks in the Persian Gulf.

The PPI report showed that the July US final-demand price index rose 4.7% year-over-year, but came in lower than expected at +0.2% month-over-month. This was also below market expectations for a 0.3% increase. The core PPI report of 0.2% month-over-month and 4.2% year-over-year fell short of expectations as well.

The decline in the 10-year Treasury note yield by 4.4 basis points to 4.639% also contributed to the stock market's positive performance. This drop was largely due to the favorable PPI report, which prompted investors to reassess their inflation expectations and adjust their bond holdings accordingly.

Meanwhile, US tech stocks continued to benefit from the strong earnings growth in the second quarter. The S&P 500 is on track for a 32% increase in earnings per share during this period, with AI spending driving much of that growth. So far, 85% of the companies that have reported Q2 earnings have beaten estimates.

Despite these positive indicators, some stocks did underperform. Cisco Systems fell more than 8% after releasing disappointing guidance related to AI-tied networking gear sales, while Cerebras Systems saw its stock price plummet by over 12% due to a decline in sales at its hardware business.