Wall Street rallies as a cut to interest rates next week looks more certain

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NEW YORK (AP) — Wall Street’s record-setting run kept rolling on Thursday, and stocks climbed after a mixed set of U.S. data kept the path clear for the Federal Reserve to cut interest rates in order to boost the economy.

The S&P 500 rose 0.8% and set an all-time high for the third straight day. The Dow Jones Industrial Average rallied 617 points, or 1.4%, and the Nasdaq composite gained 0.7%. Both also hit records.

Treasury yields eased in the bond market following the economic reports, which were some of the final data releases left that could sway the Federal Reserve’s thinking before its meeting next week. The unanimous expectation on Wall Street is that it will cut its main interest rate for the first time this year.

One of Thursday’s reports said more U.S. workers applied for unemployment benefits last week, an indication that the number of layoffs could be rising. It’s the latest discouraging signal on the job market, where hiring has slowed substantially. The labor market had seemed to be settling into a low-hire, low-fire state, but an increase in layoffs could put it in an even tighter vise.

The hope on Wall Street has been for a slowdown, but a precisely measured one. The job market has to be weak enough to get the Fed to cut interest rates, which can give a kickstart to the economy and to prices for investments, but not so much that it causes a recession.

The Fed has been hesitant to cut interest rates throughout 2025 because of the threat that President Donald Trump’s tariffs could make inflation worse. That’s because lower interest rates can push inflation even higher.

A report on inflation Thursday showed prices are continuing to rise faster for U.S. households than the Fed hopes, but only by what economists expected. Consumers paid prices for food, gasoline and other costs of living that were 2.9% higher in August than a year earlier, a slight acceleration from July’s 2.7% inflation rate.

That’s above the Fed’s target of 2%, but traders believe the Fed will see the slowing job market as the bigger problem now than inflation. The Fed has just one tool to fix either of them, and moving interest rates to help one often means hurting the other in the short term.

“Right now, inflation is a key subplot, but the labor market is still the main story,” according to Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.

On Wall Street, stocks of companies that could benefit from lower interest rates rallied, including owners of real estate and homebuilders. Builders FirstSource, which sells cabinets, lumber and other building supplies, climbed 4.5%.

Centene helped lead the market with a jump of 9%. The health care company said its business results through August are tracking with the profit forecast for the year that it had earlier given. That’s more than analysts are forecasting.

Opendoor Technologies soared 79.5% after the company said it hired Shopify’s chief operating officer, Kaz Nejatian, as its CEO. Opendoor, which helps people buy and sell homes online, also announced a $40 million investment by one of its founders and an investment firm tied to another founder.

Warner Bros. Discovery leaped 28.9% following reports that Paramount Skydance is preparing a bid to buy the entertainment company. Paramount Skydance, which was the result of Skydance’s purchase of Paramount in August, jumped 15.6%.

Kroger added 0.3% after the grocer reported a stronger profit for the latest quarter than analysts expected, though its revenue came up just shy of forecasts. It also raised the bottom end of its forecasted range for profit over the full year.

Helping to keep the market’s gain in check was Oracle, which fell 6.2%. But that gave back only a bit of its monster gain from the day before, when it soared nearly 36% for its best day since 1992.

All told, the S&P 500 rose 55.43 points to 6,587.47. The Dow Jones Industrial Average jumped 617.08 to 46,108.00, and the Nasdaq composite gained 157.01 to 22,043.07.

In stock markets abroad, European indexes ticked higher after the European Central Bank left interest rates unchanged at its latest meeting. The European bank is on pause following an earlier set of cuts, and its president, Christine Lagarde, said future moves are “not on a predetermined path.”

France’s CAC 40 rose 0.8%, and Germany’s DAX returned 0.3%.

In Asia, indexes were mostly higher. Stocks jumped 1.7% in Shanghai but fell 0.4% in Hong Kong.

In the bond market, the yield on the 10-year Treasury eased to 4.02% from 4.04% late Wednesday.

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AP Writers Teresa Cerojano and Matt Ott contributed.