S&P 500 hits record, Nasdaq gains as soft producer prices cool Fed hike bets

Why Thursday's inflation and earnings tape lifted the S&P 500 to a record

US equities advanced on Thursday after a cooler-than-expected producer price report added to evidence that inflation is easing, sending the S&P 500 to a record high. The broad index rose about 0.6%, the Nasdaq Composite gained 0.8%, and the Dow Jones Industrial Average added just 0.1% in a relatively quiet session.

The producer price index, which measures prices from the seller's side, came in below forecasts. Core measures also slowed on both a monthly and annual basis. That followed Wednesday's consumer price report, which showed inflation easing in July. Together, the two prints led traders to reduce the probability of a Federal Reserve rate increase in September.

The session was not uniformly positive. Shares of Cisco and Cerebras dropped after the AI-linked companies reported earnings, while Applied Materials was due to report after the close following a 190% gain over the past year. Oil prices fell as President Trump shifted from an active military campaign toward economic pressure, and Washington said it retains total control over the Strait of Hormuz. In labor data, initial jobless claims ticked up week over week, but continuing claims declined.

Behind the record: what softer PPI means for Fed pricing and AI-linked shares

Cooling inflation reduces immediate rate pressure, but the Fed story is not settled

The PPI miss matters because it came one day after a softer CPI reading, reinforcing the view that price pressures are decelerating. That is why traders dialed back bets on a September hike. Yet the market's understanding is more nuanced than the index record suggests: Fed watchers still expect at least one rate increase by the end of the year. The soft data may ease the near-term path, but it has not produced a clear consensus that the central bank is finished.

AI-linked earnings are being re-priced company by company

The gains in the Nasdaq masked a clear divergence among AI-related names. Cisco and Cerebras fell after their results, signaling that investors are no longer treating all AI exposure as a single momentum trade. Applied Materials becomes the next test: with the stock up 190% over 12 months, the after-close report carries a high bar, and weak guidance could spill over into the chip-equipment complex.

Oil is the inflation wildcard behind the disinflation trade

Falling oil prices contributed to the friendly inflation backdrop, but the administration's assertion of control over the Strait of Hormuz shows energy supply remains a politically sensitive variable. If that situation were to affect shipping or prices, the energy input that is currently helping core inflation cool could reverse.

What this session sets up for traders before Applied Materials reports

For traders and investors, the session's message is not simply risk-on. The move is built on cooling inflation, but several named catalysts still need to resolve.

• Reassess September Fed pricing rather than assuming a dovish turn. The PPI and CPI prints both slowed, but Fed watchers still expect at least one hike this year, so positions premised on an unconditional pause should keep additional tightening risk in view.
• Look for chip-sector follow-through from Applied Materials. The stock reports after Thursday's close up roughly 190% over the past year, and same-day drops in Cisco and Cerebras show AI-related disappointment is being punished quickly.
• Do not discount oil-supply headlines. Lower oil prices helped establish the cooler inflation picture, but the Strait of Hormuz control claims leave energy costs exposed to a geopolitical reversal.
• Treat the labor-market split as unresolved. Initial jobless claims rose while continuing claims fell, a mixed signal that does not settle last week's weak jobs report and leaves future labor data able to move Fed expectations.