Wall Street Nears Record Highs as Inflation Data Fuels Rate Cut Hopes/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ U.S. stocks rallied Tuesday, with the S&P 500 and Nasdaq approaching record highs, after softer-than-expected inflation data fueled speculation of a September Federal Reserve rate cut.
Quick Highlights
- S&P 500 up 0.6%, nearing all-time high set two weeks ago.
- Dow Jones rises 434 points (+1%) as of mid-morning trading.
- Inflation for July held steady at 2.7%, slightly below expectations.
- Core inflation hits highest level since early 2025, complicating Fed’s decision.
- Traders now see a 94% chance of a September rate cut, up from 86% the previous day.
- Intel, Circle Internet Group rally; Celanese and Cardinal Health slump.
- Asian markets mixed after Trump delays China tariffs by 90 days.
Wall Street Nears Record Highs as Inflation Data Fuels Rate Cut Hopes
Full Story —
NEW YORK (AP) — U.S. markets climbed sharply on Tuesday, with the S&P 500 and Nasdaq Composite approaching fresh record highs, as cooler-than-expected inflation data boosted hopes the Federal Reserve could cut interest rates as early as September.
The S&P 500 rose 0.6% by mid-morning, within striking distance of its all-time high from two weeks ago. The Dow Jones Industrial Average jumped 434 points (+1%), while the Nasdaq Composite gained 0.5%.
Why Investors Are Bullish
Tuesday’s gains followed a Labor Department report showing consumer prices in July were 2.7% higher year-over-year, matching June’s pace but coming in slightly below economist expectations of 2.8%. Cheaper gas and modest grocery costs helped offset upward pressure from tariffs imposed earlier this year.
Core inflation — which excludes food and energy — rose to 3.1%, its highest level in five months, signaling potential long-term price pressures. Despite that uptick, Wall Street reacted positively, with CME Group data showing traders now assign a 94% probability to a September rate cut, up from 86% on Monday.
Fed’s Balancing Act
The Federal Reserve faces competing pressures:
- Lower rates could boost borrowing, investment, and consumer spending.
- Tariffs from President Donald Trump’s trade policies risk fueling inflation further.
Fed Chair Jerome Powell has said the central bank needs to see sustained improvement in inflation data before acting. The Fed will receive one more inflation report and a jobs report before its September 17 meeting.
“Tariffs can take months to fully show up in consumer prices,” said Brian Jacobsen, chief economist at Annex Wealth Management. “That will keep the Fed cautious, even as political pressure mounts.”
Market Movers
- Intel (+2.3%) gained after Trump praised CEO Lip-Bu Tan, days after previously calling for his resignation.
- Circle Internet Group (+5.1%) rallied despite a quarterly loss that exceeded analyst forecasts; revenue grew 53% in its first quarter as a public company.
- Celanese (-13.6%) fell on weak demand outlook despite beating earnings estimates.
- Cardinal Health (-8.7%) slid after revenue missed expectations, disappointing investors following a 33% year-to-date rally.
Global Market Reaction
- Asia: Japan’s Nikkei 225 surged 2.1%, while South Korea’s Kospi slipped 0.5%. Chinese markets edged higher after Trump delayed a new round of tariffs by 90 days, raising hopes for renewed trade negotiations.
- Bonds: The 10-year U.S. Treasury yield ticked up to 4.31% from 4.27% on Monday. The 2-year yield, more sensitive to Fed moves, dipped to 3.75% from 3.76%.
Outlook
While the S&P 500’s rally from its April low has impressed investors, analysts warn that valuations are stretched. Companies will need to deliver strong earnings to sustain momentum, especially if Fed policy decisions diverge from market expectations.
“The market is priced for perfection,” said Gary Schlossberg, market strategist at Wells Fargo Investment Institute. “Any surprises in inflation or jobs data between now and mid-September could shift the narrative quickly.”
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