U.S. stock futures indicated a positive open Wednesday as investors reacted to unexpectedly soft producer price data, signaling continued optimism for equities.
The Labor Department reported that the producer price index (PPI) for final demand fell 0.1% in August, following a revised 0.7% gain in July. Economists had anticipated a 0.3% increase after the initial 0.9% jump for the previous month.
Year-over-year, the PPI slowed to 2.6%, down from 3.1% in July, defying expectations that the rate would remain steady at 3.3%. The weaker-than-expected inflation data has strengthened the case for a quarter-point interest rate cut by the Federal Reserve next week.
Adding to the bullish sentiment, Oracle (NYSE:ORCL) shares soared 32% in pre-market trading, fueled by its outlook for cloud infrastructure revenue to rise from $10.3 billion in fiscal 2025 to $144 billion by 2030, despite slightly below-forecast first-quarter earnings.
“The jobs picture keeps deteriorating and while that should make it easier for the Fed to cut rates this fall, it could also throw some cold water on the recent rally,” said Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management.
He added, “Worse still, if the CPI shows a worsening trend of higher inflation on Thursday then the market will begin worrying about stagflation. The bull market has been extremely resilient this year, but we could be approaching an inflection point where it is tested again.”
Tuesday’s trading saw stocks mostly climb, with the Dow up 196.39 points (0.4%) to 45,711.34, the Nasdaq rising 80.79 points (0.4%) to 21,879.49, and the S&P 500 gaining 17.46 points (0.3%) to 6,512.61. Investors appeared encouraged by expectations of a Fed rate cut alongside ongoing strong corporate results.
The Labor Department also revised non-farm employment for the 12 months through March 2025 down by 911,000 jobs, highlighting a cooling labor market.
However, the gains were uneven across sectors. Housing stocks slid 2.9%, reflecting the Philadelphia Housing Sector Index’s drop, while airlines fell 2% on the NYSE Arca Airline Index. Steel and gold also declined, whereas banking and networking stocks recorded notable gains.
Investors now turn their attention to Thursday’s consumer price inflation report, which could shape the Fed’s next steps and influence whether the market rally can sustain its current momentum.
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