Stocks rise, dollar falls as soft US jobs data fuels rate cut bets

Core Insights - MSCI's global equities gauge reached a record high, while U.S. Treasury yields and the dollar declined due to rising expectations for interest rate cuts following softer labor market data overshadowing a higher-than-expected inflation reading [1] Inflation Data - The Consumer Price Index (CPI) increased by 0.4% in August, marking the largest rise in seven months, following a 0.2% increase in July, driven by a 0.4% rise in housing costs and a 0.5% increase in food prices, with food consumed at home rising by 0.6% [2] Labor Market Insights - Initial claims for state unemployment benefits rose by 27,000 to a seasonally adjusted 263,000 for the week ending September 6, the highest level since October 2021, exceeding economist estimates of 235,000 claims [3] - The increase in claims solidified expectations for the Federal Reserve to cut interest rates, with traders pricing in a 100% probability for a rate cut at the upcoming Fed meeting and a roughly 5% chance for a half percentage point cut [4] Market Reactions - The focus of the market shifted from CPI data to jobless claims, indicating potential further weakness in the labor market, which is influencing market sentiment [5] - Despite economic slowdown indicators, the market is pricing in additional Federal Reserve easing, supporting equity market performance, with major indexes achieving record closing highs: Dow Jones up 617.08 points (1.36%), S&P 500 up 55.43 points (0.85%), and Nasdaq Composite up 157.01 points (0.72%) [6]