all Street rose on Thursday after producer prices data provided further evidence of inflation cooling in the world's largest economy, and stoked hopes that the Federal Reserve will soon end its monetary policy tightening.
U.S. producer prices barely rose in June and the annual increase in producer inflation was the smallest in nearly three years.
Keeping a lid on optimism, a separate report showed weekly jobless claims unexpectedly fell last week, indicating that the labor market remains tight.
Some investors believe that a recession warning that has been flashing on Wall Street for the past year may be sending a false signal and that the Federal Reserve will be able to tame inflation and still escape a deep downturn.
The signal — called the yield curve — has continued to reverberate in 2023 and is now sending its strongest warning since the early 1980s of a coming downturn. But despite the alarms becoming louder, the stock market has rallied and the economy has remained resilient, prompting some analysts and investors to rethink its predictive power. On Wednesday, the Consumer Price Index report showed a sharp decline in inflation last month, further buoying investor optimism and pushing stocks higher.
After a two-day meeting, the Federal Reserve decided to leave interest rates unchanged. “Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy,” the central bank’s post-meeting statement said. The surprising aspect of the decision came with the “dot plot” in which the individual members of the FOMC indicate their expectations for rates further out. The dots moved decidedly upward, pushing the median expectation to a funds rate of 5.6% by the end of 2023.