Market Beats Expectations as Oil Prices Rebound

The stock market indexes rose significantly on Friday, despite a strong inflation report that increased the likelihood of a rate hike by the Federal Reserve. The Nasdaq Composite (^IXIC) gained 1.3%, the S&P 500 (^GSPC) added 1.1%, and the Dow Jones Industrial Average (^DJI) climbed 1%. This uptick came despite a 0.4% increase in consumer prices, with gasoline accounting for over a third of the headline increase.

The odds of a quarter-point hike at the September 15-16 meeting rose to 86.7%, according to CME Group's FedWatch tool. Traders expect the Federal Reserve to raise federal funds rates next week, which could have significant implications for the market. However, falling oil prices weighed on energy-related stocks, with Brent Crude sliding 2.7% to $104.68.

The tech sector drove much of the gains, with Apple (AAPL) climbing 2.5%, Alphabet (GOOG) (GOOGL) gaining 2.7%, and Caterpillar (CAT) rising 2.1%. Principal Asset Management strategist Seema Shah expressed concern that one hike may not be enough to combat inflation running above target.

The University of Michigan's consumer sentiment index fell 7.5% in September to 47.8, the second-lowest reading in the survey's history dating back to 1952. People expect inflation to continue rising, and the constrained oil shipping system is not helping.