Stocks Snap Skid as Oil Prices Fall, Inflation Data Confirms Rate Hike Bets

Stocks rebounded from a four-day losing streak on Friday as oil prices pulled back and investors took a closer look at the latest inflation data. The August Consumer Price Index (CPI) report showed inflation was hotter than expected, but not enough to change the market's expectation of a Fed rate hike next week.

The CPI numbers were in line with expectations, but the core reading was higher than anticipated, pushing bets on a September rate hike to around 90%. Long-term yields rose to their highest close since July 2024, but longer-dated Treasuries recovered to finish little changed. This may indicate that investors are expecting more than just a rate hike to soften financial markets.

The S&P 500 and Nasdaq indices opened higher, driven by a drop in crude prices and strong earnings from Oracle, but the small-cap Russell 2000 lagged behind. The Dow Jones Industrial Average also rose, with the S&P 500 ending up 0.9% and the Nasdaq about 1%. Breadth was positive, with nine out of eleven sectors closing green, led by megacap growth sectors, Industrials, Communications, Consumer Discretionary, and Tech.