Wall Street rallies as a cut to interest rates next week looks more certain

NEW YORK (AP) — Wall Street's record-setting run keeps rolling, and stocks are rising Thursday after a mixed set of U.S. data kept the path clear for the Federal Reserve to cut interest rates in order to boost the economy.

The S&P 500 rose 0.8% and was on track to set an all-time high for a third straight day. The Dow Jones Industrial Average was up 608 points, or 1.3%, as of 2:17 p.m. Eastern time, and the Nasdaq composite was 0.7% higher. Both are also heading toward records.

Treasury yields eased in the bond market following the economic reports, which were some of the final data releases left that could sway the Federal Reserve's thinking before its meeting next week. The unanimous expectation on Wall Street is that it will cut its main interest rate for the first time this year.

One of Thursday's reports said more U.S. workers applied for unemployment benefits last week, an indication that the number of layoffs could be rising. It’s the latest discouraging signal on the job market, where hiring has slowed substantially. The labor market had seemed to be settling into a low-hire, low-fire state, but an increase in layoffs could put it in an even tighter vise.

The hope on Wall Street has been for a slowdown, but only for a precisely measured one. The job market has to be worrying enough to get the Fed to cut interest rates, which can give a kickstart to the economy and to prices for investments, but not so weak that it causes a recession.

The Fed has been hesitant to cut interest rates throughout 2025 because of the threat that President Donald Trump’s tariffs could make inflation worse. That’s because lower interest rates can push inflation even higher.

A report on inflation Thursday showed prices are continuing to rise faster for U.S. households than the Fed hopes, but only by the amount that economists expected. Consumers paid prices for food, gasoline and other costs of living that were 2.9% higher in August than a year earlier, a slight acceleration from July’s 2.7% inflation rate.

That’s above the Fed’s target of 2%, but traders believe not by enough to convince the Fed that inflation is the bigger problem now for the economy than the slowing job market. The Fed has just one tool to fix either problem, and moving interest rates to help one often means hurting the other in the short term.

“Right now, inflation is a key subplot, but the labor market is still the main story,” according to Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.

On Wall Street, Centene helped lead the market with a jump of 10.7%. The health care company said its business results through August are tracking with the profit forecast it had earlier given for the year. That's more than analysts are forecasting.

Opendoor Technologies soared 67.2% after the company, which helps people buy and sell homes online, said it hired Shopify’s chief operating officer, Kaz Nejatian, as its CEO. It also announced a $40 million investment by one of its founders and an investment firm tied to another founder.

Kroger rose 1.3% after the grocer reported a stronger profit for the latest quarter than analysts expected, though its revenue came up just shy of forecasts. It also raised the bottom end of its forecasted range for profit over the full year.

Warner Bros. Discovery surged 28.5% following a report that Paramount Skydance is considering making an offer to buy the entertainment company. Paramount Skydance, which was formed by Skydance's purchase of Paramount in August, jumped 8.1%.

Helping to keep the market's gain in check was Oracle, which fell 6.5%. But that gave back only a bit of its monster surge from the day before, when it soared nearly 36% for its best day since 1992 on excitement about multibillion dollar contracts won amid the frenzy around artificial-intelligence technology.

In stock markets abroad, European indexes ticked higher after the European Central Bank left interest rates unchanged at its latest meeting. The European bank is on pause following an earlier set of cuts, and its president, Christine Lagarde, said future moves are “not on a predetermined path.”

France’s CAC 40 rose 0.8%, and Germany’s DAX returned 0.3%.

In Asia, indexes were mostly higher. Stocks jumped 1.7% in Shanghai but fell 0.4% in Hong Kong.

In the bond market, the yield on the 10-year Treasury eased to 4.02% from 4.04% late Wednesday.

AP Writers Teresa Cerojano and Matt Ott contributed.