Soft Inflation Reading Lifts Stocks as Rate Hike Bets Ease
The S&P 500 and Nasdaq indices rose on Wednesday as investors cheered a lower-than-expected inflation reading, which tempered bets of an imminent interest rate hike by the Federal Reserve.
A report from the Commerce Department showed the Personal Consumption Expenditures (PCE) price index stood at 3.4% annual growth in August, beating economists' estimates of 3.7%. This softer-than-anticipated reading has led traders to reassess their expectations of future rate increases, with the CME FedWatch Tool now indicating a roughly 38% chance of an October hike.
Stocks that are sensitive to interest rates and economic growth showed significant gains, including software companies Palo Alto Networks and Microsoft. The S&P 500 sectors of information technology and energy led the pack in terms of performance, while real estate and financials trailed behind.