U.S. stocks ended higher on Thursday after the latest inflation report reinforced expectations of a 25-basis point rate cut by the Federal Reserve, while stocks tried to rebound from a shaky start to September as investors continued to buy the dip. All three major indexes ended in positive territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) climbed 0.6% or 235.06 points, to close at 41,097.77 points, after hitting an intra-day high of 41,107.35 points.

The S&P 500 gained 0.8% or 41.63 points, to end at 5,595.76 points. Consumer discretionary, communication services and tech stocks were the biggest gainers.

The Technology Select Sector SPDR (XLK) gained 0.8%. The Consumer Discretionary Select Sector SPDR (XLY) advanced 1.1%, while the Communication Services Select Sector SPDR (XLC) rose 1.9%. All 11 sectors of the benchmark index ended in positive territory.

The tech-heavy Nasdaq rose 1% or 174.15 points to finish at 17,569.68 points.

The fear-gauge CBOE Volatility Index (VIX) was down 3.50% to 17.07. Advancers outnumbered decliners on the NYSE by a 3.45-to-1 ratio. On the Nasdaq, a 1.73-to-1 ratio favored advancing issues. A total of 10.58 billion shares were traded on Thursday, lower than the last 20-session average of 10.82 billion.

Tech Stocks Rally After Release of Fresh Inflation Data

Shares of mega-cap tech companies continued their rally on Thursday as investors bought the dip ahead of the Federal Reserve’s September FOMC meeting next week.

Shares of Alphabet Inc. (GOOGL) and Microsoft Corporation (MSFT) gained 2.3% and 0.9%, respectively. Also, shares of NVIDIA Corporation (NVDA) rose 1.9%. Microsoft carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Earlier on Thursday, investors tried to digest a fresh inflation report. The Labor Department reported that the producer price index (PPI), a measure of the average change in prices businesses receive for their goods and services, rose 0.2% month over month in August, which came in line with expectations.

Core PPI, which excludes the volatile food and energy prices, rose 0.3%, higher than the consensus estimate of an increase of 0.2%. Year over year, PPI rose 1.7% in August after increasing 2.1% in July. Core PPI rose 3.3% in August from year-ago levels after advancing 3.2% in July.

The PPI report follows the consumer price inflation (CPI) data that showed core prices increased marginally in August but the inflation rate fell to its lowest level since February 2021.

Investors are now convinced that the Federal Reserve will cut interest by only 25 basis points. A string of soft economic data released last week has dashed hopes of a 50-basis point rate cut.

On Thursday, traders were still pricing in a 69% chance for a 25-basis point rate cut by the Fed when it meets on Sep 17-18, according to the CME Group’s FedWatch Tool.

Economic Data

The Labor Department reported that jobless claims totaled 230,000 for the week ending Aep 7, increasing 2,000 from the previous week’s revised level of 228,000. The four-week moving average was 230,750, an increase of 500 from the previous week’s revised average of 230,250.

Continuing claims came in at 1,850,000, an increase of 5,000 from the previous week’s revised level of 1,845,000. The 4-week moving average was 1,852,000 a decrease of 2,250 from the previous week's revised average of 1,854,750.

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