From the archive · Markets
Stocks sit at records while the Fed debates a hike — the strangest bull market in years
The S&P 500 closed last week at an all-time high of 7,798.99 after two inflation reports came in softer than feared. What makes this rally unusual is the direction of the argument behind it: the next Federal Reserve move under debate is a rise, not a cut.
The S&P 500 ended Thursday at 7,798.99, a record close, up 0.65% on the day, with the Nasdaq up 0.81%, in a session Reuters reported was driven by memory-chip makers — Sandisk up 13.7%, Micron up 4.2% — and the big platforms. The trigger was July's producer-price report, which came in flat on the month and slowed to 4.7% year-on-year from June's 5.5%, a day after consumer prices rose just 0.1% in July, leaving headline CPI at 3.4% and core CPI at 2.5% — its lowest since March 2021.
That data did something unusual to the market's Fed arithmetic. Futures pricing tracked by CME's FedWatch had put the odds of a September rate hike above 70% earlier this summer; after the week's inflation and jobs data those odds collapsed to roughly 30%, per coverage in American Banker and Reuters. The rally, in other words, is not about cheap money coming — markets still price a better-than-90% chance of a higher policy rate by year-end — it is about tightening arriving more slowly than feared.
Underneath the macro relief sits an earnings season that has broken records of its own. With over 90% of the S&P 500 reported, LSEG data cited by Reuters puts profit growth at 32.7% year-on-year excluding mark-to-market gains at Alphabet and Amazon; Bessemer Trust's tally has aggregate growth near 50% with 87% of companies beating estimates and ten of eleven sectors growing. Notably, the market has climbed 22% over twelve months while its forward price-to-earnings multiple fell from 22.4 to 20.2 — the gains have been paid for by profits, not by stretching valuations.
The Ledger's read: a record set against hike risk is sturdier than one set against cut hopes, because it doesn't depend on rescue. The vulnerability is specific instead — index-level results now lean heavily on AI-linked earnings continuing to compound, and on oil, which has eased but answers to the unresolved situation around Iran and the Strait of Hormuz, staying quiet. Watch the week's FOMC minutes and Walmart's results for the first tests.
From The Ledger archive. A factual review record is not available for this article. About our editorial standards. Material sources are credited and linked above; quotations are brief and attributed.