Thursday's report showed a jump in jobless claims along with weaker-than-expected wholesale price pressures. This has removed any lingering traders' expectations that the Federal Reserve will raise interest rates again in June, and strengthened bets on future rate cuts.
Jobless insurance claims rose last week to the highest level since October 2021, and the producer price index rose 2.3% from a year earlier, the smallest gain since January 2021 based on the report.
Futures contracts tied to the Fed's policy rate currently reflect no chance of a rate hike in June, and indeed little chance the Fed will cut rates by a quarter of a percentage point from the current benchmark 5%-5.25% range.
"Evidence of subdued demand in the labor sector will allow the FOMC to avoid raising rates at the June meeting," wrote Nancy Vanden Houten of Oxford Economics.
The rate futures contract shows traders' expectations for the Fed to start cutting interest rates in September.
Less than 48 hours ago, traders were seeing as much as a 25% chance that the Fed would raise rates for the 11th time in a row at next month's meeting. Traders shrugged off most of those expectations on Wednesday, after consumer inflation in April was reported to have risen 4.9% from a year earlier.
After Thursday's data, the CME FedWatch Tool showed no chance of a rate hike, and a 3% chance of a June rate cut.
Fed policymakers have about five more weeks of data to digest before their next meeting, and have said they intend to sift through it carefully before making a decision.
