Wall Street gains on softer producer prices; Starbucks soars

Wall Street advanced on Tuesday after producer prices data showed abating inflation pressures, keeping the Federal Reserve on track to cut rates in September, while Starbucks soared after appointing Chipotle’s Brian Niccol as CEO.

U.S. producer prices increased less than expected in July as a rise in the cost of goods was tempered by cheaper services, indicating that inflation continued to moderate. In the 12 months through July, the PPI increased 2.2% after climbing 2.7% in June.

“This creates more flexibility for the Fed to lower rates later this year without a doubt and that’s what driving the market response right now,” said Dave Grecsek, managing director in investment strategy and research at Aspiriant.

Yield on the 10-year Treasury note and on the 2-year note ticked lower after the data, while traders’ bets of a 50-basis-point rate cut increased to over 50% after the report, according to CME’s FedWatch Tool.

Markets expect the interest rates to be reduced by a total of 100 basis points by the end of 2024.

Investors now await the all-important consumer price (CPI) figures for July on Wednesday and retail sales data on Thursday to firm bets on an aggressive rate cut by the U.S. central bank.

Stocks wobbled on Monday with the S&P 500 nearly flat and the Nasdaq eking out modest gains, following a turbulent week marked by mixed economic reports and a rate hike by Japan’s central bank.

At 9:35 a.m. ET, the Dow Jones Industrial Average rose 183.81 points, or 0.47%, to 39,540.82, the S&P 500 gained 45.19 points, or 0.85%, to 5,389.58 and the Nasdaq Composite gained 208.14 points, or 1.24%, to 16,991.01.

Ten of the 11 major S&P sectors were trading higher, with information technology and communication services leading gains.

Energy shares were an outlier, dipping on lower oil prices as OPEC’s move to cut its forecast for demand growth in 2024 tempered fears of supply risks posed by widening conflict in the Middle East.

Starbucks was the top performer on the S&P 500, rising 19.6% and was on track for its biggest one-day percentage gain in at least 15 years after it appointed Chipotle Mexican Grill head Brian Niccol as chairman and chief executive officer.

Chipotle dropped 10.3%.

Home Depot eased 0.5% after the home improvement chain forecast a decline in annual profit and a bigger drop in its annual comparable sales.

Chipmaker Nvidia led gains amongst megacap and growth stocks with an over 3% gain, while the Philadelphia SE Semiconductor Index was last up 1.3%, touching a near two-week high.

BuzzFeed jumped 10% after the digital media company narrowed its net loss in the second quarter to $6.6 million from $22.5 million a year earlier.

Hormel Foods added 2.8% after Citigroup upgraded its rating to “buy” from “neutral”, becoming the only one with this rating on the Skippy peanut butter maker.

Investors will now look ahead to comments from Atlanta Fed President Raphael Bostic, due at 1:15 p.m. ET, on the outlook for the U.S. economy.

Wall Street’s fear gauge, the CBOE Volatility Index, was at 19.49 points after falling to 18.87 on Monday.

Advancing issues outnumbered decliners by a 3.77-to-1 ratio on the NYSE and by a 2.66-to-1 ratio on the Nasdaq.

The S&P 500 posted seven new 52-week highs and two new lows, while the Nasdaq Composite recorded 24 new highs and 49 new lows.