The S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) showcased significant performance during Tuesday’s trading session, with SPY achieving an impressive intraday all-time high of $654.54. This bullish momentum was buoyed by the release of August’s producer price index (PPI), a key indicator of inflation at the wholesale level. The PPI revealed a monthly decline of 0.1%, markedly better than the market’s consensus estimate of a 0.3% increase. Additionally, the core PPI, which omits the typically volatile food and energy sectors, mirrored this trend, also falling by 0.1% against expectations for a rise of 0.3%. These figures represent a notable turnaround from the previous month, during which PPI surged by 0.9%, marking the highest uptick in over three years. The revision of July’s PPI downward to 0.7% further bolstered optimism in the markets.
In response to the PPI updates, reactions from notable figures emerged. Former President Donald Trump took to Truth Social, decrying the Federal Reserve’s direction and calling for a significant reduction in interest rates. “No Inflation!!! ‘Too Late’ must lower the RATE, BIG, right now. Powell is a total disaster, who doesn’t have a clue!!!,” he remarked. Federal Housing Finance Agency Director Bill Pulte echoed Trump’s sentiments in a post on social media, summarizing the data in more critical terms.
In political news, the likelihood of a government shutdown before year-end surged to 56% on Polymarket. This uncertainty stems from threats by Democrats to block a funding bill preventing a shutdown by October 1 unless Republicans agree to address rising Obamacare premiums, among other stipulations. The bill’s passage hinges on securing a minimum of seven Democratic votes in the Senate. House Speaker Mike Johnson emphasized the role of congressional Democrats in determining the outcome, stating, “The ultimate question of whether there’s gonna be a government shutdown at the end of the month is gonna be up to congressional Democrats.”
Despite the looming potential for political gridlock, Wall Street appears increasingly optimistic. Three financial institutions revised their year-end price targets for the S&P 500. Barclays upped its forecast from 6,050 to 6,450, attributing the adjustment to the momentum derived from artificial intelligence (AI) investments bolstering corporate earnings. Wells Fargo also raised its target, moving it from a range of 6,300 to 6,500 up to 6,650, citing robust AI capital expenditure as a driving force. “There is froth, but as long as AI capex remains intact, the bull market should continue,” commented Wells Fargo’s chief equity strategist, Ohsung Kwon. Deutsche Bank, on the other hand, set its sights even higher, projecting a year-end closing of the benchmark index at 7,000, an increase from its prior estimate of 6,550. Chief equity strategist Binky Chadha noted potential risks from inflation and high valuations, indicating a cautious yet favorable outlook on cyclical stocks.
The S&P 500 (SPX) ultimately closed the day with a gain of 0.30%, while the Nasdaq 100 (NDX) finished slightly higher at 0.04%.
