S&P 500 Record High as Bond Yields Rise Ahead of Inflation Data

The S&P 500 Record High extended a tech-led rally as investors took Fed rate cuts on board in response to slowing labor market activity, with everyone awaiting CPI and PPI prints to confirm or challenge the easing path. With most S&P 500 constituents falling, mega-cap tech rescued the index as Apple fell on iPhone 17 debut reports, Oracle surged on strong bookings, and bonds declined with Treasury yields climbing. Oil rose on fresh Middle East risk, and two-year yields rose from their 2022 lows as markets weighed softer payroll revision against prospects of a quarter-point cut next week.

S&P 500 Record High

Stocks reached all-time highs on optimism that the Federal Reserve would lower interest rates to combat an employment slowdown, with traders bracing for inflation data that will put the market’s faith in the Fed to the test.

While most S&P 500 stocks declined, the index increased on increases in all major technology companies except Apple Inc., which slumped 1.5% after announcing its iPhone 17, which included a previously predicted slimmer model. Oracle Corp. soared late in the day after reporting a significant increase in bookings. Bond prices fell, putting an end to a four-day surge. Oil prices rose after an Israeli strike in Qatar sparked worries of a Middle East crisis escalation.

Following more statistics indicating labor-market softening, markets braced for major inflation readings expected in the coming days. The data will help establish the tone for next week’s Fed meeting, as well as the extent of easing until the end of 2025. And it will undoubtedly decide if Wall Street can sustain this month’s advances.

With money markets virtually unanimously forecasting three Fed rate cuts this year, the bar for both the producer and consumer price indices is high. A higher-than-expected inflation rise would complicate policy options at a time when there is growing pressure to give economic stimulus via lower interest rates, according to Bankrate’s Stephen Kates.

“It is clear the economy is caught between a rock and a hard place – or more accurately, between a labour shock and a hot pace,” he told reporters.

According to Chris Zaccarelli of Northlight Asset Management, a weakening labour market should make it simpler for the Fed to decrease interest rates, but it may also put a damper on the current market gain.

The market will start to fret about’stagflation’ if the CPI reveals a deteriorating trend of increased inflation on Thursday.

S&P 500 Sets a Record on Fed Cut Bets

According to Ian Lyngen and Vail Hartman of BMO Capital Markets, the most important concern today is how the August inflation data will impact the market’s expectations for the Fed’s decision next week.

“The Fed is cutting 25 basis points – barring a far more dramatic downshift in the trajectory of realised inflation, in which case a half-point cut could be on the table,” the spokespersons said. “We’re solidly in the quarter-point camp and view the August inflation update as more meaningful for the conversations about where the Fed cutting cycle ends, not how it begins.”

In the run-up to the inflation reports, official statistics revealed that US employment growth was significantly less strong in the year ending March than previously estimated. According to the preliminary benchmark revision released Tuesday, the number of employees on payrolls would likely be reduced by a record 911,000, or 0.6%. The final numbers are coming early next year.

US two-year yields rise from their lowest since 2022.

Jamie Dimon said the record adjustment to US payroll numbers is another evidence that the US economy is slowing.

“The economy is weakening,” JPMorgan Chase & Co.’s CEO stated in an interview with CNBC Tuesday. “Whether that is on the way to recession or just weakening, I don’t know.”

According to Jeff Roach of LPL Financial, a weakening labour market will enable the Fed to underline the need to lower interest rates. Roach predicts that the Fed will formally start its rate-cutting campaign at the next meeting.

“For now we assume a modest net dovish impact: firming some the likelihood of three successive cuts in September, October and December without making this anything close to a lock,” said Krishna Guha, an analyst with Evercore.

Massive US Payroll Benchmark Revisions in Recent Years

The latest BLS correction cut the March 2025 payroll figure by 911,000.

According to Gary Schlossberg of the Wells Fargo Investment Institute, weakening job growth, as highlighted by Tuesday’s report, should be viewed against the backdrop of ample market liquidity, a stock market rally, and the Fed’s potential rate cuts, pointing to an economic “soft patch” rather than a sustained slowdown.

“The shallow growth slowdown that we are anticipating is fully consistent with our recommended tilt towards more liquid, large-cap stocks and other higher-quality sectors of the financial market, as the economy navigates a period of slowing growth ahead of a forecasted recovery in 2026,” according to him.

According to Omar Aguilar of Charles Schwab Corp., a quarter-point fall in interest rates by the Fed next week would be the most favourable situation for financial assets, with a greater cut risking upsetting investors.

If regulators leave borrowing prices steady, Wall Street would likely react “fairly negatively” since a rate cut is all but priced in, Schwab Asset Management’s CEO and CIO said at the Future Proof conference in Huntington Beach, California. If the Fed goes large, lowering interest rates by 50 basis points, investors may see it as a hint that the economy is in peril.

S&P 500 Options Imply Modest CPI-Related Move

The government will issue its most recent consumer price index ahead of the Federal Reserve’s policy meeting on September 16 and 17. Core CPI, a measure of underlying inflation excluding food and fuel, is expected to rise 0.3% in August for the second consecutive month, according to the Bloomberg poll median forecast.

Economists will examine how increasing US import taxes affect consumers. So far, many businesses have made an attempt to avoid raising prices in order to sustain sales.

According to Bloomberg statistics, options traders expect the S&P 500 to swing somewhat on Thursday after the CPI announcement, with a move of approximately 0.6% in either direction. That is considerably below the average realised move of 1% over the last year.

“Given the recent softness in labour market data, even if we see higher inflation data this week, we still think the Fed will cut rates next week,” said Chris Kampitsis of Barnum Financial Group. At the moment, the Fed is most likely more concerned about the labour market than with inflation.

Corporate Highlights:

Nvidia Corp., whose processors and systems are at the centre of the artificial intelligence computer boom, announced plans to launch a new product capable of handling demanding activities such as video generating and software development.

Alphabet Inc.’s Google cloud computing business has up to $106 billion in promises from current customer contracts that it has yet to complete, according to the company’s CEO, Thomas Kurian.

JPMorgan Chase & Co.’s third-quarter trading revenue might increase by a percentage in the “high teens” compared to the previous year, well beyond analysts’ current forecast of an 8.2% increase.

Boeing Co. delivered 57 commercial aircraft in August, its highest month since 2018, in the latest indicator of stable manufacturing operations as the US planemaker seeks to increase production rates.

United Airlines Holdings Inc. said business travel has rebounded from a fall earlier this year, with evidence that the trend would continue through the remainder of 2025.

UnitedHealth Group Inc. anticipates the majority of its Medicare Advantage customers to be in highly rated plans that receive bonus payments next year, a windfall to its health insurance business.

Humana Inc. shares fell after news surfaced that the criteria for Medicare health plans to win bonus payments looked to become more stringent.

Cracker Barrel Old Country shop Inc. has announced that shop remodels would be halted as the restaurant chain continues to backtrack on planned improvements such as a new logo, which have harmed the company’s stock.

Shell Plc has given Goldman Sachs Group Inc. a $40 billion mandate to monitor the oil company’s pension funds, in one of the largest outsourced transactions of its type.

Nebius Group NV stock jumped on Tuesday after the company signed an artificial intelligence infrastructure agreement worth up to $19.4 billion with Microsoft Corporation.

Anglo American Plc has agreed to buy Canada’s Teck Resources Ltd., forming a firm worth more than $50 billion in one of the largest mining transactions in almost a decade.

American Express Co. increased its worldwide merchant acceptance rate by more than 16% in the year ending June 30, as it continued to expand in its domestic and international network of credit card acceptance locations.

Exxon Mobil Corp. and Chevron Corp. are optimistic about China’s future demand for liquefied natural gas, even if Russia succeeds in connecting another pipeline to the Asian country.

Lazard Inc. intends to deploy half a dozen bankers in its newly formed Abu Dhabi office as part of CEO Peter Orszag’s years-long ambition to treble the firm’s revenue.

Airbus SE can meet its aircraft delivery goal for the year, but turning over 820 planes is dependent on obtaining engines, which are still tough to find, according to CEO Guillaume Faury.

Novartis AG has agreed to purchase Tourmaline Bio Inc. for around $1.4 billion, as the Swiss pharmaceutical pursues bolt-on acquisitions to strengthen its medication pipeline.

The future CEO of Kering SA has pledged to reduce debt and expenses in order to restore the faltering luxury goods company that owns Gucci.