S&P 500 rally pushes higher: What's driving investor confidence

July's better-than-feared Consumer Price Index (CPI) report and rising hopes of interest rate cuts in September are pushing stocks to new highs.

Yahoo Finance Senior Reporter Allie Canal breaks down what's driving market optimism, including Citi's new 6,600 S&P 500 (^GSPC) year-end target and what to watch heading into the Kansas City Federal Reserve's Jackson Hole Economic Symposium event next week.

To watch more expert insights and analysis on the latest market action, check out more Morning Brief.

Video Transcript

00:00 Speaker A

Um, Ali, let's start with you and the leg of the rally that we've seen most recently which seems to be fueled by hopes for lower rates pushing things to records.

00:19 Ali

Right, and those rate cut hopes that stems from CPI. And what's interesting is that there was really things in this report that could appease the optimist and the pessimist. We did see headline inflation coming on par with expectations, dropping on a month over month basis, but we did see firmer core prices. Core inflation hitting a six-month high. Services inflation also firmed and heading into this report, that had been softer and was really offsetting a lot of that the increases that we saw in core goods. So under the hood of CPI, there there are these concerns, but right now, this clearly was a better than feared report in a lot of ways. And that's leading to this latest record high, the S&P 500 closing for its 16th time this year at records. And leading up to today, it hasn't all been driven by Fed policy. A lot of it has been driven by earnings expectations along with the AI story. Earlier this week, we saw City increase its price target on the S&P to 6600. And they specifically cited earnings momentum, not just for the rest of this year, but also 2026 and beyond. Now, that's not to say we won't see some choppiness and some volatility. We have Jackson Hole coming up later this month or usually tends to be some chop around that. We still have a lot of economic releases to come. And also considering the fact that stocks are still trading in this euphoric territory, that makes markets a lot more vulnerable to potential downside risks. But it's clear that rate cut hopes in September, that if we see that materialize, that's only going to fuel the momentum that we've been seeing in recently weeks and recent months. Related Videos

03:17

Would markets 'sell off' if Fed holds rates in September?

Yahoo Finance Video • 2 hours ago 01:14

What is CPI? A closer look at 'Core CPI' vs. 'headline CPI'

Yahoo Finance Video • yesterday 06:06

Barrick Posts $1 Billion Charge on Mali Mine

Bloomberg • yesterday 05:44

C3.ai stock nosedives on preliminary earnings: Where the AI trade stands

Yahoo Finance Video • yesterday

View Comments