US stocks defied expectations, closing near record highs despite a surge in producer prices and a weakening labor market. The S&P 500 increased marginally to secure its 18th record close of the year, while the Nasdaq Composite narrowly missed its previous record high. The sharp 0.9% increase in producer prices, driven partly by tariffs, raised concerns about inflation. However, traders remained optimistic about the economy’s prospects.
The Federal Reserve is expected to cut interest rates by a quarter-point in September, and fed-funds futures remain relatively unchanged on this expectation. Treasury yields rose moderately, but did not significantly impact market sentiment. The mixed signals suggest that investors are taking a cautious approach, weighing the potential risks of tariffs against the resilience of US stocks.
The surprising performance of US stocks highlights the ongoing disconnect between economic indicators and stock market trends. As the labor market weakens and inflation rises, traders appear to be focused on other factors, such as monetary policy and global economic trends. For now, the S&P 500’s record-breaking streak continues, leaving investors wondering what’s next for the US economy and its stocks.
Source: https://www.marketwatch.com/story/why-tariff-driven-inflation-and-a-weakening-labor-market-havent-been-bad-for-u-s-stocks-8f5e00d1