Stocks Steady Amid Cooling Inflation and Labor Market Signals

US stocks traded flat on Thursday as investors digested a fresh batch of economic data that could provide clues on the Federal Reserve's upcoming interest rate decision. The market is closely watching for signs of how aggressive the central bank will be in its efforts to tame inflation.

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 July's reading was revised lower. On an annualized basis, PPI increased 1.7%, in line with forecasts. This follows the recent cooling of consumer prices, suggesting that inflationary pressures may be easing. However, the labor market data painted a more mixed picture, with initial jobless claims climbing more than expected to 230,000 last week, up 2,000 from the prior period. This could signal a potential softening in the job market, which the Fed will closely monitor as it weighs its policy actions.

Investors Anticipate a Smaller Rate Cut

The market is currently pricing in an 87% probability of a 25-basis-point rate cut by the Federal Reserve at its upcoming policy meeting, up from just 50% a few days ago. This shift in expectations reflects the market's interpretation of the latest economic data, which suggests that the central bank may opt for a more modest rate reduction compared to the larger, 0.5% cut that was previously anticipated. Investors are closely watching for any signals from the Fed that could provide insight into the magnitude of the rate adjustment.

Sector Spotlight: Tech Rallies, Moderna Stumbles

The technology sector was a bright spot in the market, with the Nasdaq Composite gaining 0.7% and building on the sharp closing gains seen in the previous session. This tech-driven rally helped offset the more modest gains in the broader S&P 500, which rose 0.5%, and the Dow Jones Industrial Average, which edged up 0.2%. However, not all companies in the sector were immune to the market's volatility, as Moderna (MRNA) shares plummeted by as much as 17% after the vaccine maker lowered its annual revenue outlook for 2025 and announced plans to slash its R&D budget.

Automakers Explore Collaboration

In a move that highlights the evolving dynamics in the automotive industry, General Motors (GM) and Hyundai (HYMTF) announced a non-binding agreement to explore jointly developing cars, powertrains, and various technologies. This collaboration could help the two automaker giants unlock economies of scale and leverage their respective strengths to better compete in the rapidly changing transportation landscape. The partnership underscores the industry's ongoing efforts to adapt to shifting consumer preferences, regulatory pressures, and technological advancements.

Housing Market Sees Affordability Improvements

The housing market is showing signs of becoming more accessible to buyers, with the median monthly mortgage payment declining by 1.3% compared to a year ago, according to data from Redfin. This improvement in affordability can be attributed to a drop in mortgage rates, which have fallen more than half a percentage point over the past six weeks as investors anticipate a rate cut from the Fed. However, home prices remain elevated due to persistent supply constraints, and buyers are still grappling with the expectation that rates will continue to decline after the central bank's policy adjustment.