Another soft inflation print lifts stocks
US stocks moved mostly higher Thursday after another inflation report showed price pressures easing.
The S&P 500 gained 0.4%, while the Nasdaq Composite rose 0.2%. The Dow Jones Industrial Average slipped about 0.2%.
The Producer Price Index came in below expectations, extending the softer inflation trend seen in Wednesday’s Consumer Price Index report.
Core inflation readings also slowed on both a monthly and annual basis.
Traders responded by cutting expectations for a September Federal Reserve rate hike, although markets still expect at least one increase before the end of the year.
The Fed gets more room after CPI and PPI
The inflation data arrived after last week’s weak employment report, which showed the US economy losing 23,000 jobs in July.
Initial jobless claims increased slightly Thursday, while continuing claims declined.
The combination of softer inflation and weaker hiring has reduced pressure on the Fed to move quickly.
But the debate inside the central bank is unlikely to disappear after two inflation reports. Policymakers remain divided over whether inflation has cooled enough to justify holding rates steady for longer.
Cisco and Cerebras drop after earnings
The broader market was positive, but several AI-linked names came under pressure.
Cisco and Cerebras both fell sharply Thursday morning after reporting quarterly results.
The moves continued a pattern seen throughout earnings season: investors are still rewarding strong AI growth, but the bar for companies tied to the sector has moved higher.
Chip-equipment maker Applied Materials reports after the close following a roughly 190% gain over the past year, putting another major AI infrastructure name in focus.
Retail earnings are also arriving from Tapestry, Dillard’s and Birkenstock, offering a fresh look at consumer spending and how companies are handling recent tariff changes.
JPMorgan says volatility is becoming the new normal
JPMorgan strategists say the defining feature of markets in 2026 has been the speed of both selloffs and recoveries.
“Drawdowns, Rebounds, Repeat” is how the bank’s global strategy team described the current market.
The AI trade has been one of the largest sources of that volatility. AI stocks have helped push major indexes to record highs, while leveraged positioning also contributed to sharp July losses when investors rushed to reduce exposure.
JPMorgan said trade policy has become another permanent source of market swings, with tariffs and export restrictions increasingly used as regular economic policy tools.
The result has been shorter market trends, faster reversals and larger intraday moves.
AI deleveraging showed how quickly momentum can reverse
The July AI selloff offered one of the clearest examples.
Highly leveraged positions were unwound quickly, and leveraged ETFs amplified the decline. Some AI infrastructure and semiconductor stocks suffered unusually large losses before rebounding sharply in August.
Recent earnings from Nebius, CoreWeave and Supermicro have helped restore confidence in AI infrastructure demand, but the market remains sensitive to capital spending, leverage and expectations.
Strong growth is still being rewarded. Misses are being punished quickly.
The dollar is caught between Fed expectations and safe-haven demand
Currency markets are also adjusting to the softer economic data.
Rabobank strategist Jane Foley said weaker payrolls and cooling inflation have reduced expectations for Fed tightening, removing one source of support for the US dollar.
At the same time, geopolitical uncertainty continues to support demand for the dollar as a safe-haven asset.
That leaves the currency caught between two forces: lower rate expectations pushing it down and global uncertainty providing support.
For equities, Thursday’s softer inflation numbers were enough to win out. The S&P 500 and Nasdaq moved higher as investors gained more confidence that the Fed may not need to tighten policy as aggressively as previously feared.
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