US stocks saw modest gains on Wednesday as Wall Street cheered another positive signal on inflation, hinting at a potential shift in the Federal Reserve’s interest-rate strategy.
The S&P 500 nudged up 0.4%, the Nasdaq Composite hovered just above break-even, and the Dow Jones Industrial Average climbed 0.6%, adding over 200 points.
The latest Consumer Price Index (CPI) data showed inflation holding steady in July, with consumer prices increasing by 2.9% year-over-year—the first time inflation has dipped below 3% since 2021.
When excluding volatile food and energy prices, the “core” CPI rose by 3.2% over the same period.
Both figures matched Wall Street’s expectations, reinforcing the narrative of cooling inflation.
This latest inflation report follows Tuesday’s upbeat data on the Producer Price Index (PPI), which tracks wholesale inflation.
The PPI showed a 2.2% year-over-year increase in July, closely aligning with the Fed’s 2% target.
These back-to-back reports may signal that the Fed is inching closer to a rate cut, a move even the Fed’s more cautious members seem increasingly open to—provided the data continues to support it.
As traders eye the Fed’s September meeting, speculation is heating up on the size of a potential rate cut.
According to the CME FedWatch tool, 36% of traders are betting on a more conservative 25 basis point cut, while others anticipate a more aggressive 50 basis point reduction.
With inflation cooling and the job market easing, Wall Street’s optimism is palpable.
The market’s mood is cautiously hopeful, but as always, the Fed holds the final card in this unfolding economic story.
As the business community watches closely, the potential for a shift in interest rates could redefine the financial landscape in the coming months.
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