Stocks kept up what's been a weeklong rally on Thursday after producer price data provided further evidence inflation is cooling and companies started earnings season stronger than analysts had expected.

The S&P 500 (^GSPC) closed up 0.9%, while the Dow Jones Industrial Average (^DJI) rose 0.1%. The tech-heavy Nasdaq (^IXIC) led gains, rising about 1.6%.

A drop in headline consumer inflation to a two-year low gave markets a boost of energy on Wednesday and was acting as a drag on the dollar.

The Producer Price Index (PPI) reading for June came in at 0.1%, undershooting expectations. Meanwhile, Labor Department data showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week.

A cooldown in inflation could give the Federal Reserve reason to ease up on its rate hike campaign, though the CME FedWatch Tool shows most traders still see odds above 90% for an increase in July.

Another potential impetus for the rally arrives with the start of earnings season. Upbeat reports from PepsiCo (PEP) and Delta (DAL) got the ball rolling Thursday, but the true kickoff comes Friday with results from Wall Street banks like JPMorgan (JPM) and Citi (C).

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