NEW YORK (AP) — Wall Street’s record-setting run kept rolling on Thursday, and stocks climbed after a mixed set of U.S. data kept the path clear for the Federal Reserve to cut interest rates in order to boost the economy.
The S&P 500 rose 0.8% and set an all-time high for the third straight day. The Dow Jones Industrial Average rallied 617 points, or 1.4%, and the Nasdaq composite gained 0.7%. Both also hit records.
Treasury yields eased in the bond market following the economic reports, which were some of the final data releases left that could sway the Federal Reserve’s thinking before its meeting next week. The unanimous expectation on Wall Street is that it will cut its main interest rate for the first time this year.
One of Thursday’s reports said more U.S. workers applied for unemployment benefits last week, an indication that the number of layoffs could be rising. It’s the latest discouraging signal on the job market, where hiring has slowed substantially. The labor market had seemed to be settling into a low-hire, low-fire state, but an increase in layoffs could put it in an even tighter vise.
The hope on Wall Street has been for a slowdown, but a precisely measured one. The job market has to be weak enough to get the Fed to cut interest rates, which can give a kickstart to the economy and to prices for investments, but not so much that it causes a recession.
The Fed has been hesitant to cut interest rates throughout 2025 because of the threat that President Donald Trump’s tariffs could make inflation worse. That’s because lower interest rates can push inflation even higher.
A report on inflation Thursday showed prices are continuing to rise faster for U.S. households than the Fed hopes, but only by what economists expected. Consumers paid prices for food, gasoline and other costs of living that were 2.9% higher in August than a year earlier, a slight acceleration from July’s 2.7% inflation rate.
That’s above the Fed’s target of 2%, but traders believe the Fed will see the slowing job market as the bigger problem now than inflation. The Fed has just one tool to fix either of them, and moving interest rates to help one often means hurting the other in the short term.
“Right now, inflation is a key subplot, but the labor market is still the main story,” according to Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.
On Wall Street, stocks of companies that could benefit from lower interest rates rallied, including owners of real estate and homebuilders. Builders FirstSource, which sells cabinets, lumber and other building supplies, climbed 4.5%.
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