Wall Street gains as mixed CPI data bolsters rate-pause hopes

Wall Street indexes gain as data suggests the Federal Reserve may keep interest rates unchanged in September.

Wall Street's main indexes experienced gains on Wednesday as new data revealed a moderate increase in consumer prices in August. This development solidified expectations that the Federal Reserve would maintain interest rates at their current levels in September. Major megacap growth stocks such as Tesla, Meta Platforms, Microsoft, and Amazon.com saw gains ranging from 1.1% to 2%. Additionally, US Treasury yields decreased from their earlier highs.

Among the top gainers in the S&P 500 sector was consumer discretionary, with Ford Motor leading the charge with a 2.8% jump. This increase was attributed to the company's plans to double the production of its hybrid F-150 pickup trucks by 2024.

Although consumer prices experienced the largest increase in 14 months in August due to surging gasoline prices, the annual rise in underlying inflation was the smallest in nearly two years. Gasoline prices reached a peak of $3.984 per gallon in the third week of August, compared to $3.676 per gallon during the same period in July.

Victoria Fernandez, chief market strategist at Crossmark Global Investment, noted that the rise in headline numbers was expected due to oil and gas prices. She stated that the Federal Reserve is unlikely to implement a 25-basis-point hike when the general expectation is that they won't. However, rate hikes are not entirely off the table for the remainder of the year.

According to the CME FedWatch Tool, traders see a 97% chance of the Fed maintaining rates in September, but a 61% likelihood of a pause in November. The stickiness in services inflation has kept the possibility of a November hike alive. A Reuters poll indicated that the Fed is likely to reduce rates only between April and June of next year.

Investors will now turn their attention to August producer prices and retail sales data, which will be released on Thursday, ahead of the Fed's policy decision on September 20.

As of 12:22 am ET, the Dow Jones Industrial Average was up 75.00 points, or 0.22%, at 34,720.99, the S&P 500 was up 14.57 points, or 0.33%, at 4,476.47, and the Nasdaq Composite was up 68.08 points, or 0.49%, at 13,841.70.

Citigroup saw a 1.6% rise after CEO Jane Fraser announced a major management reorganization that will lead to more job cuts. This move aims to simplify the company's structure and give Fraser greater direct oversight.

US-listed shares of Chinese electric-vehicle makers Nio and Xpeng experienced declines of 1.9% and 3.7%, respectively, following the European Commission's initiation of an investigation into whether their vehicles warrant punitive tariffs.

Low-cost carrier Spirit Airlines saw a 2.5% decrease as it adjusted its third-quarter revenue outlook to reflect the rising fuel prices.

Moderna, a drugmaker, gained 3.2% after announcing that its flu vaccine mRNA-1010 achieved the primary goal in a late-stage trial. The company also revealed plans to scale down manufacturing of its COVID-19 vaccine.

On the NYSE, declining issues outnumbered advancers by a ratio of 1.28-to-1, while on the Nasdaq, the ratio was 1.19-to-1. The S&P index recorded nine new 52-week highs and the same number of new lows, while the Nasdaq recorded 14 new highs and 131 new lows.