Markets rally ahead of inflation reports
NEW YORK — Stocks climbed again Monday, as Wall Street made its final moves ahead of a high-stakes report that will hopefully show inflation hammered the economy less hard last month.
The S&P 500 rose 43.05, or 1.1 percent, to 4,110.41 for its fourth straight gain. That’s its longest winning streak since July, in the early days of the market’s bounce back from its battering earlier in the year.
The Dow Jones Industrial Average gained 229.63, or 0.7 percent, to 32,381.34, and the Nasdaq composite rallied 154.10, or 1.3 percent, to 12,266.41.
The nation’s punishingly high inflation, and the steps the Federal Reserve is taking to combat it, have been the driving forces on Wall Street all year. Economists expect a report on Tuesday to show that prices for consumers were 8.1 percent higher in August than a year earlier, but that inflation was not as bad as July’s 8.5 percent rate.
A slowdown would bolster hopes that inflation topped out in June at 9.1 percent and is on its way back down. That in turn could allow the Federal Reserve to avoid a worst-case scenario for markets, where it jacks shortterm interest rates up to recession-causing levels and holds them there a long time.
Beyond Tuesday’s headliner report on inflation at the consumer level, a report on Wednesday is expected to show inflation slowed at the wholesale level last month.
A report the following day will show how U.S. households have altered their spending amid high inflation, while a Friday report will show how much inflation households are preparing for in upcoming years.
They’re all crucial data points for the Federal Reserve as it mulls how much to raise interest rates at its meeting next week. Fed officials have loudly reaffirmed recently their plans to raise rates enough to slow the economy,.
But with Tuesday’s report possibly continuing a trend, many investors and economists are hopeful that inflation could return to more “normal” levels quickly, unlike the 1970s, when it took many years.
Jonathan Golub, chief U.S. equity strategist at Credit Suisse, wrote in a report that investors and economists expect inflation to collapse within the next 12 to 18 months.
Markets are convinced the Fed will hike its key short-term interest rate by a hefty 0.75 percentage points next week for the third straight meeting. But the hope is that an easing of inflation will allow the Federal Reserve to tiptoe the narrow pathway for a “soft landing” of the economy.
In the stock market, the vast majority of stocks rallied. Energy producers were close to the top of the leaderboard, benefiting from climbing oil prices.