Overnight – Investors ignore inflation and softening economy

Investors continued to blindly buy Nvidia overnight, driving up the tech sector and shrugging off a hotter-than-anticipated producer price data as focus shifted to the widely expected Federal Reserve interest rate cut next week.

The producer price index for final demand in August increased by 0.2% in August, above estimates of 0.1%. Meanwhile, in the 12 months to August, the figure rose by 1.7% following an uptick of 2.1% in the previous month. While the August headline and core PPI came in slightly above expectations on a monthly basis, there soft components in the report including both nursing care facilities and portfolio management and investment advice that filter in the Fed’s preferred measure of inflation, or PCE, that point to easing price pressures, Evercore ISI said. 

The Fed has been widely tipped to cut interest rates at its upcoming gathering from Sept. 17-18 in response to signs of a slowing labor market, although uncertainty surrounded whether the central bank would roll out a 25-basis point cut or a deeper 50-point drawdown. The inflation data this week has bolstered the chances that the Fed will opt for the quarter-point reduction.

Moderna stock fell more than 12% after the drugmaker cut its annual revenue forecast and  its research and development (R&D) budget. Moderna said it would cut its R&D expense by about $1.1 billion starting in 2027 in light of “recent commercial challenges,” and now expects 2025 revenue of $2.5 billion to $3.5 billion.

Wells Fargo fell 4% after the Office of the Comptroller of the Currency, or OCC, flagged deficiencies in the bank’s financial crimes risk management practices. The OCC’s enforcement action against the bank prohibits the bank from expanding into new high-risk products or areas without permission from the regulator. 

All eyes now turn to the FOMC rate decision meeting next Wednesday night/Thursday morning Australian time