The S&P 500 crossed 7,800 for the first time Thursday before closing at a record 7,798.99, up 50.49 points, or 0.65%, as softer inflation and falling oil prices gave investors another reason to believe the Federal Reserve may leave interest rates alone next month.

The Nasdaq Composite gained 214.54 points, or 0.81%, to 26,803.03. The Dow Jones Industrial Average barely moved, adding 69.72 points, or 0.13%, to 53,839.99.

Small-cap stocks continued to outperform. The Russell 2000 reached an intraday record above 3,060 before closing at 3,052.85, up 0.24%. The index is now up about 23% this year, comfortably ahead of the S&P 500’s 13.9% gain.

Two things drove Thursday’s market: inflation came in cooler and oil got cheaper.

Wholesale prices were unchanged in July, better than economists expected, while producer prices rose 4.7% from a year earlier. The report followed Wednesday’s relatively mild consumer inflation reading and immediately reduced expectations that the Fed will raise rates at its September meeting.

That distinction matters. The question facing markets is whether the Fed raises rates again — not whether it cuts them.

After Thursday’s inflation report, futures markets put the probability of a September rate increase at roughly 35%, down from about 40% before the report. The two-year Treasury yield, which is particularly sensitive to Fed expectations, fell to about 4.14%, while the benchmark 10-year yield eased to roughly 4.64%.

Inflation is still well above the Fed’s 2% target, however, and policymakers remain divided over whether another increase is necessary. One softer month does not resolve the inflation problem; it simply gives the Fed more room to wait.

Oil moved sharply in the other direction, and stocks welcomed it.

Brent crude fell $1.91, or 2.15%, to settle at $87.07 a barrel. West Texas Intermediate dropped $2.02, or 2.4%, to $81.25.

The decline followed signs of weakening global demand and an enormous increase in U.S. crude inventories. Commercial crude inventories jumped 17.4 million barrels last week, the largest weekly increase since January 2023.

The International Energy Agency now expects global oil consumption to contract by 1.6 million barrels a day this year as high prices and restricted supply tied to the U.S.-Israel war with Iran weigh on demand.

For businesses, cheaper oil matters far beyond gasoline stations. Lower energy prices eventually work their way through trucking, aviation, shipping, manufacturing, packaging and nearly every supply chain that moves physical goods.

But Thursday also delivered a very different message from the bond market.

The Treasury sold $25 billion of 30-year bonds at a yield of 5.22% — the highest borrowing cost at a 30-year auction since 2001.

That created an unusual split. Short-term Treasury yields fell because investors believe the Fed may pause. Long-term borrowing costs remain exceptionally high because investors are demanding greater compensation for inflation, government debt and fiscal uncertainty over the coming decades.

In plain English, Wall Street became more comfortable with the next several months while remaining nervous about the next 30 years.

That distinction matters enormously for businesses. Short-term financing costs are becoming somewhat friendlier. Mortgages, commercial real estate loans, infrastructure projects and other long-duration financing remain expensive.

Individual stocks produced some much larger swings than the indexes.

Tapestry, the owner of Coach and Kate Spade, plunged after investors focused on a softer-than-expected outlook despite another strong quarter from Coach. The reaction demonstrated just how little room highly valued companies have for disappointment: beating the quarter is no longer enough if the forecast does not keep pace with expectations.

StubHub dropped more than 20% after its earnings report, while AI-chip company Cerebras fell roughly 15% despite revenue growth of more than 70%. Cisco also declined after reporting better-than-expected revenue and earnings as investors focused instead on pressure on gross margins.

There were substantial winners as well.

Birkenstock jumped more than 11% after stronger quarterly results, while Ardagh Metal Packaging surged after its controlling shareholder instructed advisers to prepare for a potential sale of the company.

Precious metals retreated after their recent run. Front-month gold futures fell 1.03% to settle at $4,363.60 an ounce, snapping a four-session winning streak, while silver declined 1.04% to $64.873.

The broader message from Thursday was straightforward: investors received lower inflation, cheaper oil and falling short-term Treasury yields on the same day.

That was enough to push the S&P 500 into record territory.

The warning is valuation.

When markets are priced for nearly everything to go right, companies can lose billions of dollars in market value because an outlook misses expectations by a fraction. Tapestry’s decline was the clearest example Thursday.

For anyone running a business, the most useful numbers were not necessarily the record S&P 500.

Fuel costs are moving lower. Short-term borrowing expectations are easing. Long-term financing remains extraordinarily expensive.

That divergence may become one of the most important business stories heading into the fall.

JBizNews Desk | Wall Street

Business News That Respects Your Time.

© JBizNews.com⁠ All Rights Reserved. Reproduction or distribution without written permission is prohibited.