Dow Jones surges 600 points to record high with peers as labor weakness trumps inflation concerns

Benchmark indices on Wall Street surged to a record high on Thursday, despite a hotter-than-expected inflation print, as the latest labor market update gave the US Federal Reserve a green signal to go ahead and cut interest rates next week.

The Dow Jones surged over 600 points to close above the mark of 46,000, while the S&P 500 and the Nasdaq notched record highs of their own, gaining close to a percent. The S&P 500 notched its 23rd record high of 2025.

Ed Yardeni of Yardeni Research raised his target on the S&P 500 to 6,800 from 6,600 earlier but also does not rule out the prospects of the index facing a melt-up towards 7,000 by the end of the year, in case of a more dovish Fed.

Consumer Price Inflation for the month of August was higher than anticipated, rising 0.4% month-on-month, the steepest increase since January this year, while analysts projected a 0.3% increase. Core CPI, which excludes the volatile food and energy prices increased 0.3% from last month, on expected lines. The year-on-year increase in both CPI and the Core CPI was in-line with expectations at 2.9% and 3.1% respectively.
However, concerns over rising inflation and a gradual seeping of US President Donald Trump’s tariffs into prices was overshadowed by the initial jobless claims update, which confirmed the weakness in the labor market.

Initial Jobless claims for the week that ended September 6, rose to 2,65,000, the highest since October 2021, while analysts called for a 2,35,000 estimate. The four-week average of initial claims also rose to the highest level since June.

While analysts do expect the Fed to converse over a 50 basis point rate cut, the consensus continues to maintain a 25 basis points move next week as the Fed may not want to get to aggressive in light of rising inflation. The CME FedWatch projects a 93% chance of a 25 basis points cut, while the rest are for 50.

Beyond equities, the US Dollar index remains below the mark of 98, while oil prices fell after the International Energy Agency projected that the oil surplus next year will be even higher than their earlier estimates. Even the Energy Information Administration in the US believes that an oil glut is already underway as OPEC+ ramps up production and supply from rivals also increases.

Elsewhere, Gold prices, having already made around 30 record highs this year so far, surpassed the inflation-adjusted record level that it had surged to in January 1980.