Stocks Steady Amid Cooling Inflation and Labor Market Signals

US stocks remained relatively flat on Thursday as investors digested a mix of economic data, including signs of easing inflation and higher-than-expected jobless claims. The market is closely watching for clues on the Federal Reserve's upcoming interest rate decision, with expectations for a quarter-point cut next week.

Navigating the Shifting Economic Landscape

Inflation Pressures Ease, but Jobless Claims Rise

The latest Producer Price Index (PPI) data showed that wholesale prices rose 0.2% in August, slightly above expectations but still indicating a cooling of inflationary pressures. This followed the recent consumer price index (CPI) report, which also pointed to gradual cooling of inflation. However, the labor market data painted a more mixed picture, with initial jobless claims climbing more than expected to 230,000 last week, an increase of 2,000 from the prior period.These data points are being closely scrutinized by investors as they try to gauge the Federal Reserve's next move. The market is currently pricing in an 87% chance of a 25-basis-point rate cut at the central bank's policy meeting next week, up from just 50% just days ago. The smaller rate reduction, compared to the larger 0.5% cut that was previously anticipated, reflects the more nuanced economic landscape.

Sector Spotlight: Tech Rallies, Moderna Stumbles

The market's performance on Thursday was driven by a mix of sector-specific movements. The tech-heavy Nasdaq Composite gained 0.7%, building on the sharp closing gains seen in the previous session. This rally in the tech sector was a bright spot, as investors continued to show enthusiasm for the industry.However, not all companies were able to ride the wave of optimism. Shares of Moderna, the vaccine maker, cratered as much as 17% after the company lowered its annual revenue outlook for 2025 and announced plans to slash its annual R&D budget. This news served as a reminder that even in a generally positive market environment, individual companies can face their own unique challenges.

Automakers Explore Collaboration

In a notable development, two major automakers, GM and Hyundai, announced a non-binding agreement to explore jointly developing cars, powertrains, and various technologies. This collaboration signals the growing importance of scale and resource-sharing in the rapidly evolving automotive industry, as companies seek to unlock efficiencies and stay competitive.The agreement between the two industry giants covers a wide range of areas, including the production of passenger and commercial vehicles, as well as the development of powertrain technologies, including gas-powered motors and clean-energy options such as electric and hydrogen-powered vehicles. The companies also said they would examine opportunities to combine resources for battery raw materials, steel, and other commodities.This partnership highlights the strategic imperative for automakers to explore new avenues of cooperation in order to navigate the complex and rapidly changing landscape of the industry. By leveraging each other's strengths and resources, GM and Hyundai aim to enhance their competitiveness and better position themselves for the future.

Housing Market Sees Affordability Improvements

In the housing market, there was some good news for prospective homebuyers. According to data from Redfin, the median monthly mortgage payment reached $2,558 during the last four weeks, a 1.3% decline from a year ago. This improvement in affordability can be largely attributed to the recent decline in mortgage rates, which have fallen more than half a percentage point over the past six weeks.The average rate on the 30-year fixed-rate mortgage currently stands at 6.2%, the lowest level since February 2023, as investors anticipate a rate cut from the Federal Reserve. However, home prices remain elevated, with the median sales price standing at $388,085, a 3.7% increase year over year. The combination of lower mortgage rates and persistent high prices is keeping the housing market in a state of flux, as buyers weigh the trade-offs between affordability and the ongoing supply constraints.

Apple's Hearing Aid Approval and AI Rollout

In the tech sector, Apple received approval from the US Food and Drug Administration for its hearing aid software to be used in AirPods. This feature, which was unveiled at the company's recent product launch, is intended to amplify sounds for individuals 18 years or older with perceived mild to moderate hearing impairment.The approval of this over-the-counter hearing aid software is a significant development, as it expands the capabilities of Apple's popular AirPod line and provides a more accessible solution for those with hearing challenges. This move aligns with the company's broader push into health and wellness technologies, further diversifying its product offerings.However, investors may have been somewhat underwhelmed by the pace of Apple's rollout of its new artificial intelligence (AI) offering, Apple Intelligence. While the iPhone 16 will be available in stores on September 20, the software update required for Apple Intelligence won't be available for US English users until October. This disconnect between the hardware and software release may have contributed to the relatively muted market reaction to the company's recent product announcements.