(July 2): Signs of economic strength alongside easing price pressures lifted most stocks in the US, with Federal Reserve Chair Kevin Warsh saying inflation risks have come down.
Economically sensitive corners of Wall Street outperformed after data showed manufacturing activity expanded for a sixth straight month as a war-driven surge in input costs cooled. While the majority of firms in the S&P 500 rose, a slide in chipmakers weighed on the index. Treasury two-year yields edged lower. Oil sank as the US said indirect talks with Iran were positive.
“Expectations of inflation over the first four weeks of this period have come down, inflation risks have come down,” Warsh said Wednesday at the European Central Bank’s annual Forum on Central Banking in Sintra, Portugal. He doubled down on a message from his first press conference as Fed chairman last month that the central bank will deliver price stability.
Warsh also repeated he isn’t going to offer “forward guidance” with regard to upcoming interest-rate policy.
“At a minimum, his comments provided no fuel for speculation on a near-term July rate hike, and in our view suggest the new Fed chair – while keeping all options open meeting by meeting – does not currently see cause for an immediate hike,” said Krishna Guha at Evercore.
The Institute for Supply Management’s manufacturing gauge held close to a four-year high in June. Prices paid for raw materials rose at a slower pace. The group’s price measure saw the largest single-month drop since July 2022 as an interim agreement between the US and Iran sent oil prices tumbling.
See also: US stocks decline as traders await Warsh comments, fresh data
“With oil prices back around their pre-Iran war levels, the prices paid index – which fell in June – probably has further to fall,” said Ariane Curtis at Capital Economics.
In the run-up to the US employment reading, data showed private-sector job creation was solid again in June, capping the best three-month stretch for hiring in more than a year.
The government’s payrolls report due Thursday is expected to show US employers added 115,000 jobs in June. That would mark the strongest six-month stretch for hiring since mid-2024.
See also: S&P 500 climbs at end of best quarter since 2020
“A number a bit above 100,000 and stability in the unemployment rate is the best-case scenario for this market, as it reinforces solid economic growth, but it won’t make rate hikes more likely,” said Tom Essaye at The Sevens Report.
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