Wall Street got an extra dose of encouragement to bid up stocks after another inflation report reinforced bets the Federal Reserve is approaching an interest-rate peak.

All of a sudden, disinflation becomes the buzzword across trading desks, with investors looking on the bright side of data showing a slowdown in prices — even though core inflation is still running above the central bank’s 2 per cent target. Equities gained further traction on news that Fed Bank of St. Louis President James Bullard — who called for aggressive hikes — has resigned.

Tech megacaps led gains on Thursday, with the S&P 500 topping 4,500 and the Nasdaq 100 up over 1.5 per cent. Amazon.com Inc. hit a 10-month high after reporting record sales during its Prime Day sale. Google’s parent Alphabet Inc. rallied about 4.5 per cent. Banks also gained ahead of results from JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. Two-year yields fell 13 basis points to 4.61 per cent. The dollar dropped for a fifth consecutive day.

The producer price index for final demand rose 0.1 per cent from a year earlier, the smallest advance since 2020. The figures came just a day after data showed consumer prices rose in June at the slowest pace since 2021.

“The disinflation narrative is in full effect,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. “It does appear that inflation is coming down across the board, and although the Fed is still likely to raise rates again at the end of this month, there is a very strong possibility that they are done raising rates for the year.”

The recent economic figures have sent clear signals that the Fed’s policy is working, but it’s possibly too early to claim victory against inflation, according to Fiona Cincotta, senior market analyst at City Index.

“If I had to choose a camp, I would probably go in the two rate hikes to come – July and possibly another one later in the year,” Cincotta added. “And I think that there will be a growing number of Fed officials who will be questioning whether more rate hikes are actually needed after July.”

Fed Bank of San Francisco President Mary Daly told CNBC Thursday that it’s too soon for policymakers to say they have done enough to return U.S. inflation to their target. While the latest consumer-price report “is very positive,” the official said she’s in a “wait-and-see mode on that, because I remain resolute to bring inflation down to 2 per cent.”

Aside from the economic debate, traders were also eagerly awaiting the unofficial start of the second-quarter earnings season Friday.

The focus is going to be mostly on the corporate outlooks given that beating profit expectations seems to be a low hurdle — even as some estimates have started to rise slowly. 

Goldman Sachs Group Inc. strategists expect U.S. companies to be able to meet the low bar set by consensus. And Bloomberg Intelligence strategist Gina Martin Adams says “the S&P 500 earnings season will likely reveal more of the ‘less bad than feared’ trend that emerged in 1Q.”

“The thing I’m focusing on in the market, of course, is earnings, to see where the numbers come in, to try to get a gauge on how companies are doing, and really what they’re forecasting going forward,” said Chris Gaffney, president of world markets at TIAA Bank.

In other corporate news, Delta Air Lines Inc. said it will make more money this quarter than Wall Street anticipated as it reported better-than-predicted results for the prior three months. PepsiCo Inc. raised its sales and earnings estimates once again after a strong quarter. Exxon Mobil Corp. agreed to buy Denbury Inc. for US$4.9 billion, its biggest acquisition in six years.

Key events this week:

• U.S. University of Michigan consumer sentiment, Friday
• U.S. banks kick off earnings, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.8 per cent as of 4 p.m. New York time
• The Nasdaq 100 rose 1.7 per cent
• The Dow Jones Industrial Average rose 0.1 per cent
• The MSCI World index rose 1.2 per cent

Currencies

• The Bloomberg Dollar Spot Index fell 0.7 per cent
• The euro rose 0.9 per cent to US$1.1226
• The British pound rose 1.1 per cent to US$1.3133
• The Japanese yen rose 0.3 per cent to 138.02 per dollar

Cryptocurrencies

• Bitcoin rose 4.2 per cent to US$31,613.29
• Ether rose 6.6 per cent to US$1,996.36

Bonds

• The yield on 10-year Treasuries declined 10 basis points to 3.76 per cent
• Germany’s 10-year yield declined nine basis points to 2.49 per cent
• Britain’s 10-year yield declined nine basis points to 4.42 per cent

Commodities

• West Texas Intermediate crude rose 2.1 per cent to US$77.31 a barrel
• Gold futures rose 0.2 per cent to US$1,964.70 an ounce