S&P 500 hits all-time high as cooler US producer prices ease rate-hike fears

Weaker-than-expected US producer prices for July eased concerns about further interest rate hikes, lifting semiconductor and large-cap technology stocks and pushing the S&P 500 to a new all-time high.

On Thursday, the Dow Jones Industrial Average closed up 69.72 points, or 0.13 percent, at 53,839.99 on the New York Stock Exchange. The S&P 500 gained 50.49 points, or 0.65 percent, to finish at 7,798.99, while the NASDAQ Composite rose 214.54 points, or 0.81 percent, to close at 26,803.03. Year to date, the S&P 500 is up 13.9 percent and the NASDAQ is up 15.3 percent.

The main catalyst was a July Producer Price Index reading that came in below market expectations.

According to the US Department of Labor, the July PPI was flat month-on-month at 0.0 percent, missing the market forecast of a 0.2 percent gain. The year-on-year increase also slowed to 4.7 percent from 5.5 percent in June. Goods prices fell 0.7 percent, while services prices rose 0.2 percent.

With the PPI following Thursday's Consumer Price Index in coming in softer, concerns about additional Federal Reserve rate hikes eased further. The July CPI rose 3.4 percent year-on-year, down from 3.5 percent in June.

According to CME FedWatch, the probability of a September rate hold priced into the fed funds futures market rose to 67.6 percent on Friday from 59.4 percent on Thursday. The Fed held its benchmark rate at an annual 3.50 to 3.75 percent at its July meeting.

Falling crude oil prices and US Treasury yields also supported investor sentiment.

October-delivery Brent crude settled at $87.07 per barrel, down 2.15 percent from the previous session. September-delivery West Texas Intermediate fell 2.43 percent to $81.25 per barrel. A 17.4 million-barrel increase in US crude inventories last week, combined with warnings from OPEC and the International Energy Agency about slowing global oil consumption due to elevated prices, weighed on crude.

The yield on the 10-year US Treasury note fell about 5 basis points from the previous session to around 4.64 percent. The policy-sensitive 2-year yield dropped more than 5 basis points to around 4.15 percent. The 30-year yield, however, declined by only about 3 basis points to just above 5.2 percent, weighed down by concerns over the fiscal deficit and government bond supply.

Semiconductors and large-cap technology stocks led the gains.

The Philadelphia Semiconductor Index climbed as much as 2.46 percent during trading before profit-taking trimmed the advance, leaving it up 0.46 percent at the close. Memory chip maker SanDisk surged 13.67 percent, and Micron Technology gained 4.23 percent. Meta rose 2.78 percent and Microsoft added 0.90 percent.

Netflix jumped 5.43 percent after billionaire investor Bill Ackman's Pershing Square disclosed a stake in the company. Pershing Square added six new positions, including Netflix, Visa, Mastercard and S&P Global.

Seo Sang-young, an analyst at Mirae Asset Securities, said US stocks opened higher and semiconductor shares again led the advance, supported by falling Treasury yields. "However, as the session drew to a close, fund flows shifted from semiconductor stocks to large-cap technology names, trimming some of the gains in the chip sector," he added.