Fed Hike Odds Tumble as Soft Inflation Sends Stocks Higher

The S&P 500 and Nasdaq Composite rose on Wednesday as a softer-than-expected inflation reading eased fears of an imminent Federal Reserve rate hike. The Commerce Department reported that the PCE price index rose 3.4 percent in August, below economists' estimate of 3.7 percent. This lower reading reduced the odds of an October Fed hike to about 38 percent, down from over 50 percent the day before.

The Dow Jones Industrial Average fell slightly, while the S&P 500 and Nasdaq were firmly higher. Megacap and growth stocks ticked higher, with Amazon.com and Apple up around 2 percent each, and Alphabet advancing 3 percent. Software stocks were among the best performers, but chip stocks weakened.

The yield on the 10-year Treasury bond held close to its highest level since June 2007, while crude oil prices rose. The benchmark S&P 500 and Nasdaq were on pace for a second straight quarterly advance, despite weakness in September driven by bond market volatility and elevated oil prices.