Inflation Data Tempts Fed Hike Bets, Stocks Rally

The US stock market saw significant gains on Wednesday, driven by a softer-than-expected inflation reading. The Personal Consumption Expenditures (PCE) price index stood at 3.4% on an annual basis in August, lower than the estimated 3.7%. This development has tempered bets on interest rate hikes by the Federal Reserve.

The Nasdaq led gains among major indexes, surging over 1% as megacap and growth stocks ticked higher. Amazon, Apple, and Alphabet were among the top performers, gaining around 2% each. On the other hand, chip stocks weakened, with Advanced Micro Devices and Broadcom falling nearly 1%.

The S&P 500 gained 44.99 points, or 0.59%, to 7,715.83, while the Nasdaq Composite rose 285.41 points, or 1.07%, to 27,082.95. The Dow Jones Industrial Average fell 29.41 points, or 0.06%, to 51,320.51.

Traders now see a roughly 38% chance of an October hike, down from over 50% seen the day prior, according to the CME FedWatch Tool. Analysts at Barclays noted that methodology changes in calculating PCE contributed to the lower reading.