Nvidia and AI Stocks Fuel US Stock Market Rally Amid Softer Inflation

The US stock market experienced an upward trend on Wednesday, August 12, as softer inflation data reduced expectations of a Federal Reserve rate increase. This led to gains in the S&P 500 and Nasdaq Composite indices.

Nvidia and other artificial intelligence (AI) stocks drove the technology sector's growth, with Nvidia rising about 2% in early trading. Micron Technology increased by 4.4%, while Broadcom advanced 1.4%. CoreWeave surged more than 20% after raising its annual revenue, operating-profit, and capital-spending forecasts.

The S&P 500 rose 0.33% to 7,753.74, while the Dow Jones gained 0.21% to 53,902.38 by 9:38 a.m. Eastern time. However, market breadth was relatively weak, with only 179 S&P 500 companies higher and just four of the index's 11 sectors advancing.

The main economic catalyst for the rally was the July Consumer Price Index (CPI), which rose 0.1% from June and 3.4% from a year earlier. Core CPI, excluding food and energy prices, increased 0.2% for the month and slowed to 2.5% on an annual basis.

The Fed kept its benchmark rate at 3.50%-3.75% on July 29, with three policymakers dissenting in favor of a quarter-point increase. The CPI report gave investors some relief after higher energy prices had revived concerns about inflation and potential rate hikes by the Federal Reserve.