Jim Paulsen, author, joins 'Closing Bell Overtime' to talk the S&P 500 and Nasdaq's record close.

Wall Street

Oracle's recent gains have contributed to record closes for the S&P 500 and Nasdaq, buoyed by optimism surrounding artificial intelligence. However, broader economic concerns remain, with recent jobs data indicating a weakening economy and slow GDP growth.

Analysts note that while inflation appears contained, with the producer price index showing modest increases, the Federal Reserve may need to shift its focus from inflation to supporting economic growth. The rise of productivity-enhancing technologies, such as those offered by Oracle, is seen as a disinflationary force, potentially impacting the job market and influencing future monetary policy decisions.

Oracle boosts S&P 500 and Nasdaq to record closes

While AI optimism is booming, though, there are some concerns about the broader economy. JP Morgan's Jamie Dimon told our Leslie Picker the latest jobs data confirms that the economy is weakening, as he put it. That comes as investors turn their attention to a key inflation report tomorrow morning. Joining us now is Paulson Perspectives author Jim Paulson. Jim, we did get another inflation report, though, producer price index, suggesting that wholesale prices not surging as much as people feared. So what what now is the question about CPI? And how does that put maybe not the September cut from the Fed, but the next two on the table? Well, I think it does add to it, because, you know, PPI tends to lead CPI in terms of the pressure shows up there first. You know, generally it's commodity prices, PPI and CPI. So it does say maybe doesn't say as much about tomorrow's report, John, as it does say the next month or the month thereafter, that there just isn't a lot in the pipeline on this tariff story. But I just think, you know, real GDP year to date now through the first two quarters is growing at one point three percent in real in real terms, annualized and job creation, nonfarm payroll, it's growing at a half a percent. And that's before the big revisions that are going to come. And with growth that slow, I just I think it's very difficult for the Fed to stay focused on inflation when inflation in CPI terms and PPI terms is running only about two, two and a half percent, 2.7 on CPI. I think they're going to have to shift to easing and protecting the growth rate of the economy. And Jim, that's some of what I meant. I think you alluded to there at the top is even if the CPI is a little aggressive, maybe even a little hot, does this PPI report suggest that maybe it doesn't stay hot and therefore the Fed has to have more of a bias toward cutting versus the bias that they seem to have had up to this point toward waiting? I think so. I think the story on tariffs is getting long in the tooth every month that goes by and it's not showing up. And, you know, you look at commodity prices that have been pretty well controlled. Now you look at the PPI, which is staying relatively benign. There's not a lot of stuff in the pipeline suggesting that CPI is going to get out of control anytime soon. And meanwhile, the job market's going directly south and real GDP growth is pretty weak and real retail sales are flat year to date. And I think the Fed's going to have to respond to growth rather than inflation. And I do think the market's starting to pick that up. In some odd way, is perhaps this oracle move today and what it represents really the demand that oracle expects from all these A.I. servers. Is that a reason to cut? I mean, we're talking about these things almost as if they're disconnected. But if the software is going to start doing that much more of the work that people perhaps were doing, does that suggest a weaker job market, at least in the near term, until companies and people figure out how to adjust to what this productivity software can do? I think it's a great point, John. If you look at the information processing industry, the employment of that industry, it's been flat to down for years. And if anything, the downside has been accelerating as those companies are growing faster and faster. What what's happening in the tech industry is they're almost becoming too productive for their own labor forces. And I think that's bleeding out into other areas. It's good. What or what it really says, if Oracle really thinks it's going to grow that fast next five years to me, that just exudes a disinflationary, deflationary force in the economy overall. And sort of, again, I think is a catalyst to focus more on on saving the job market right here than on inflation, when it's already two point seven percent. You know, I point out that in the 1990s, I think the inflation rate averaged CPI averaged two point six percent per annum during the decade of the 90s, which most people would say was nirvana. And today we have essentially the same inflation rate over the last couple of years. It's still a problem for the Federal Reserve. So I think I think they've got to move off that pretty soon.

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Breakdown