U.S. stocks experienced a comeback this Wednesday, reversing earlier losses, and ending the day in positive territory. The benchmark S&P 500 (^GSPC) rose by over 1%, while the Nasdaq Composite (^IXIC) led the gains with a solid increase of nearly 2.2%. The Dow Jones Industrial Average (^DJI) also climbed about 0.2%, or more than 100 points, bolstered by a strong performance from tech stocks.
Inflation Data Shapes Market Sentiment
The market’s rebound came after a key inflation report showed that consumer prices in August eased slightly. The Consumer Price Index (CPI) showed a decline in headline inflation to its lowest level in over three years. However, core inflation, which excludes volatile food and energy prices, increased by 0.3% month-over-month, surpassing economists’ expectations of 0.2%.
This mixed inflation data is influencing market expectations for the Federal Reserve’s upcoming policy decision. Investors are now leaning towards a 25 basis point rate cut rather than the 50 basis point reduction. The probability of a 50 basis point cut has dropped to just 15%, according to the CME FedWatch Tool, down from 44% a week ago.
Tech Sector Leads the Rally
Tech stocks were the leaders in today’s market rally. The Information Technology sector (XLK) surged over 3%, outpacing the S&P 500’s overall gain. Nvidia (NVDA) was a major driver of this surge, with shares soaring over 8% following a keynote address by CEO Jensen Huang at the Goldman Sachs Communacopia and Technology Conference. Huang's comments on the expanding role of generative AI in data centers and cloud computing helped boost investor confidence.
Microsoft (MSFT) and Amazon (AMZN) also saw significant gains, rising more than 2%. The tech sector’s strong performance highlights its resilience and the growing excitement around AI innovations.
Oil Prices Rebound
Oil prices also rebounded after hitting their lowest levels since 2021 earlier this week. West Texas Intermediate (CL=F) rose roughly 2% to settle at $67.14 per barrel, while Brent Crude (BZ=F) also increased by about 2%, closing at $70.49 per barrel. This recovery in oil prices could provide some stability for energy stocks in the coming days.
Mixed Reactions to Economic and Political Developments
The market's reaction to economic data was somewhat tempered by other news. The debate between presidential candidates Donald Trump and Kamala Harris did not provide much clarity on economic policies, leaving investors to focus on more immediate factors like inflation and the Fed’s decision.
In corporate news, GameStop (GME) saw a sharp decline of nearly 12% after reporting disappointing quarterly results and announcing plans to issue 20 million new shares. Trump Media & Technology Group (DJT) dropped 13% following a contentious debate performance by former President Trump.
Looking Ahead
As investors take in today's data and market movements, all eyes continue to remain on the Federal Reserve's meeting next week. The August CPI report suggests a smaller rate cut is more likely, but further details from the Fed’s September 18 announcement will be crucial for setting the tone for the remainder of the year.
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