Key Takeaways

  • The three major indexes closed higher yesterday after fresh Fed comments provided more insight into the interest-rate timeline.
  • The PPI report and FOMC minutes take the spotlight later today as investors remain optimistic over growth prospects.

Stellar Stocks

The S&P 500 strengthened with three straight days of gains, closing Tuesday with a rise of 0.5%. The Nasdaq added 0.6%, while the Dow Jones Industrial Average closed with a 0.4% increase. The broad-based advance follows hints from Federal Reserve members that the central bank might not hike the key interest rate at the upcoming meeting.

Against that backdrop, 10-year Treasury yields have receded against their 16-year highs. Last week, bond yields hit 4.8%, before sliding down to 4.65%. Bonds are generally considered a safe investment and are preferred by market participants during times of geopolitical stresses.

With that in mind, recent stresses surrounding tensions in the Middle East appear to have faded as the market digested upbeat remarks from Fed officials. 

The positive market reaction could be attributed to investors expecting the Fed to nail the so-called soft landing. In other words, gradually raising interest rates to cool the economy and stamp out inflation without causing a recession.

Stealing the Limelight

Attention is turning to today’s US PPI report. The Producer Price Index (PPI) report helps gauge the current inflation rate by examining how much manufacturers are experiencing price fluctuations. This can be considered an earlier measure of inflation than the Consumer Price Index (CPI) report, which is set to be released on Thursday. 

The CPI, which is the most-precise index to measure inflation, will show if prices have cooled since August. Both the headline CPI and core CPI (which excludes food and energy) are expected to rise by approximately 0.3% for the month, marking a 3.6% annual increase. 

Further, the market will be looking for clues on the Fed’s position on their benchmark interest rate in the meeting minutes from their September 19th-20th meeting, being published today.