Wall Street rallies, oil jumps as data strengthens Fed pause bets

Wall Street advanced and crude prices surged on Thursday as robust economic data failed to budge expectations that the Federal Reserve will leave its key interest rate unchanged next week.

A broad rally sent all three major stock indexes higher, with the continued upward trajectory of oil prices putting energy stocks (.SPNY) on top.

A spate of economic data released before the opening bell showed energy prices, specifically gasoline, were largely responsible for a hotter-than-expected producer prices reading and a consensus-beating retail sales number.

“The Fed has guided to focus on core (inflation), and the change in prices that we’ve seen is coming from energy,” said Michael Green, chief strategist at Simplify Asset Management, Philadelphia. “That suggests that the Fed is done raising rates and that’s removing concerns around equities.”

“This is consistent with the idea of a soft landing,” Green added.

The European Central Bank (ECB) hiked its key interest rate to a record high, but also hinted that this latest increase would be its last.

“Once one central bank decides they’re going to pause, everyone gets on board,” Green said. “There’s a general sense that the rate hiking cycle is done for now.”

Financial markets have baked in a 97% likelihood of the Fed holding the Fed funds target rate steady at 5.25%-5.50% at the conclusion of next week’s monetary policy meeting, and a growing 66.8% chance of holding firm at the November meeting to follow, according to CME’s FedWatch tool.

This report’s information was first seen on REUTERS; to read more, click this link.