S&P 500 Tops 6,500 on Signs Economy in Good Shape: Markets Wrap

(Bloomberg) — A solid economic reading drove stocks to fresh all-time highs, but Wall Street traders refrained from making big moves before inflation data that could bring more clues on the pace of Federal Reserve rate cuts. Short-dated Treasury yields rose. The dollar fell.

Just 24 hours ahead of the release of the Fed’s favored price gauge, data showed the US economy expanded faster than initially estimated, underscoring the resilience of America’s primary growth engine — consumer spending.

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While that soothes recession jitters, it raises doubts about the inflation outlook. A report Friday is forecast to show the personal consumption expenditures price index excluding food and energy rose 2.9% in July from a year ago. That would be the fastest pace in five months.

“In-line or lower results will likely cement investors’ confidence in a September rate cut,” said Bret Kenwell at eToro. “While a higher-than-expected print may not take a rate cut off the table next month, it could sour Wall Street’s mood as inflation concerns grow.”

The S&P 500 topped 6,500, buoyed by gains in tech shares. Nvidia Corp. pared losses as several analysts raised their price targets despite an uninspiring forecast. In late hours, Dell Technologies Inc. gave a bullish outlook.

The policy-sensitive two-year yield rose two basis points to 3.63%. Swap contracts continued to fully price in a quarter-point Fed cut this year by October and a second one by year-end. About 20 basis points of easing are priced in for September.

Inflation-adjusted gross domestic product, which measures the value of goods and services produced in the US, increased at a 3.3% annualized pace in the second quarter. That compared with an initially reported 3% increase.

“The economy appears to be on all cylinders, and it should be a boost of confidence to markets that most of the tariff-angst was misplaced earlier this year,” said Chris Zaccarelli at Northlight Asset Management. “However, markets have already priced in a September rate cut, and it is important that the inflation data remains restrained between now and then.”

As long as the upcoming inflation reports don’t surprise to the upside, the markets should continue their grind higher, he noted.

“Although we are concerned about elevated valuations, it hasn’t been prudent to take preemptive action ahead of a downturn,” Zaccarelli said. “The bull market is alive and well and it will take a meaningful catalyst – such as a recession – to derail it.”

To Jeff Roach at LPL Financial, the upward revisions to second-quarter growth raises the bar for the third quarter.

“Slowing job growth indicates the economy will not keep up with the above-trend growth from the previous quarter,” Roach said. “Softer growth in the third quarter will add fuel to those calling for rate cuts.”

While the latest GDP report provides a bit more clarity, the focus remains on the delicate balance between elevated inflation and a softening labor market, according to Jim Baird at Plante Moran Financial Advisors.

Baird noted that Fed Chair Jerome Powell threw an additional lifeline of hope to investors looking for a September rate cut at his Jackson Hole speech last week. Whether policymakers will deliver additional easing in the months that follow is less certain.

“Powell’s acknowledgment of the growing risk to the job market appears to open the door to additional rate cuts even though most measures of inflation remain above the central bank’s comfort zone,” Baird said.

US initial jobless claims edged down to 229,000 last week, suggesting employers are holding onto current workers amid economic uncertainty.

Businesses have been reluctant to cut staff on a large scale, but they have pulled back on hiring. At the same time, the elevated number of recurring applications indicates that it is taking longer for out-of-work people to find a job.

Meantime, the GDP report also showed the PCE excluding food and energy rose at a 2.5% rate in the second quarter — the same as initially estimated.

US PREVIEW: Fed’s Preferred Gauge to Show Persistent Inflation

While core inflation is likely to rise — in large part because of financial-services prices — the July data due Friday will likely show slower pass-through from tariffs, according to Stuart Paul at Bloomberg Economics.

Given that we are seeing modest attempts of a stock advance in the run-up to the inflation data, anything other than an unexpectedly high core PCE means that the short-term risks are to the upside, not the downside for the rest of the week, said Steve Sosnick at Interactive Brokers.

“Yesterday we wrote about how Nvidia earnings had the potential to either trash or turbocharge major stock indices. So far, it’s done neither,” Sosnick says. “In theory, tomorrow’s core PCE report can do the same, but traders are assuming that it too will have little impact. That’s probably prudent.”

As for Nvidia, analysts are staying bullish on the shares. Citing the chip giant’s longer-term prospects, at least 10 firms hiked their 12-month price targets after its results, raising the average by 3% to $202.60, according to data compiled by Bloomberg.

While calm prevailed on Wall Street on Thursday, Adam Turnquist at LPL Financial noted financial markets often shift gears in September, entering a period historically associated with seasonal weakness and increased market instability.

Over the last 75 years, the S&P 500 has posted an average drop of 0.7% in September, making it the worst performing month for stocks, Turnquist noted. When September finished in the red, the average loss was 3.8%. This compares to the average gain of 3.2% when September was higher.

‘Blue Skies’

“Seasonal data represents the typical climate for stocks, but not the weather. And currently, the weather for the S&P 500 is filled with blue skies and record highs,” he said. “When accounting for momentum and trend, which we believe is much-needed context, September doesn’t look so bad.”

When the S&P 500 is above its 200-day moving average going into September, he said the average price return for the month jumps to 1.3%, with 60% of occurrences producing positive results.

“We remain confident in the equity outlook and forecast the S&P 500 at 6,800 by June 2026,” said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management. “We think broad, diversified exposure to equity markets should enable investors to participate in AI-driven growth, though we see greater opportunities at a single-security and thematic level.”

Her firm recommends investors seek a more balanced exposure across the AI value chain, with a preference now for laggards that offer a more attractive risk-reward tradeoff. Alongside the tech sector, it favors the health care, utilities, and financials sectors within US equities.

Corporate Highlights:

Dell Technologies Inc. boosted its annual outlook and posted quarterly sales and profit that topped analysts’ estimates, building on continued strong demand for artificial intelligence servers that power an expanding fleet of data centers. Gap Inc. expects its margins will shrink this year, a sign tariffs are slowing the retailer’s recent turnaround momentum. Snowflake Inc. surged after the company gave a strong outlook, calming investor anxiety that software vendors will be hurt by a slowing economy and new competition from artificial intelligence upstarts. CrowdStrike Holdings Inc. rose following an earnings report that included strong results, but a sales forecast that narrowly missed analysts’ estimates. Best Buy Co. warned that tariffs continue to weigh on its business ahead of the crucial holiday shopping season, taking the shine off a quarter in which the electronics retailer boosted sales for the first time in more than three years. Bath & Body Works Inc.’s profit missed expectations for the first time since 2020, underscoring the turnaround challenge for its new chief executive officer. Victoria’s Secret & Co. raised its outlook after strong quarterly sales signaled new Chief Executive Officer Hillary Super’s turnaround plan is taking hold. Dick’s Sporting Goods Inc. fell as the retailer prepares to acquire Foot Locker Inc., a sign that investors are nervous about management’s ability to turn around the struggling sneaker chain. Toronto-Dominion Bank and Canadian Imperial Bank of Commerce topped estimates as both companies reported strong performance in their domestic-banking units and lower-than-expected loan-loss provisions. Nippon Steel Corp. said it’s moving closer to its long-term goal of reaching 100 million tons of annual crude steel production capacity after its acquisition of United States Steel Corp. Some of the main moves in markets:

Stocks

The S&P 500 rose 0.3% as of 4 p.m. New York time The Nasdaq 100 rose 0.6% The Dow Jones Industrial Average rose 0.2% The MSCI World Index rose 0.5% Bloomberg Magnificent 7 Total Return Index rose 0.5% The Russell 2000 Index rose 0.2% Nvidia fell 0.8% Currencies

The Bloomberg Dollar Spot Index fell 0.3% The euro rose 0.4% to $1.1683 The British pound rose 0.1% to $1.3512 The Japanese yen rose 0.3% to 146.92 per dollar Cryptocurrencies

Bitcoin fell 0.5% to $111,913.45 Ether fell 3.4% to $4,439.68 Bonds

The yield on 10-year Treasuries declined three basis points to 4.21% Germany’s 10-year yield was little changed at 2.69% Britain’s 10-year yield declined four basis points to 4.70% The yield on 2-year Treasuries advanced two basis points to 3.63% The yield on 30-year Treasuries declined five basis points to 4.88% Commodities

West Texas Intermediate crude rose 0.3% to $64.32 a barrel Spot gold rose 0.7% to $3,422.14 an ounce ©2025 Bloomberg L.P.