Market Rises Despite Almost Certain Rate Hike
The market indexes experienced an unexpected boost despite a strong indication of an upcoming rate hike. The Federal Reserve's decision to raise federal funds rates next week is now almost certain, with odds standing at 86.7% according to CME Group's FedWatch tool.
The inflation report for August showed the CPI index rose 0.4% last month and 3.4% over the last year, right in line with economists' estimates. The core reading, which strips out food and energy, came in at 0.3% for the month, slightly above expectations.
Falling oil prices played a crucial role in the market's rise, outweighing the inflation report. Brent Crude slid 2.7% to $104.68, while the United States Oil Fund (USO) dropped 3.2%. The tech titans, including Apple (AAPL), Alphabet (GOOG and GOOGL), and Caterpillar (CAT), also experienced significant gains.
Principal Asset Management strategist Seema Shah questioned whether one hike is enough after years of inflation running above target. Her answer was no, but the market indexes seem to disagree with today's gains.