Stock Market Indexes Rally on Cooler Inflation Data

The stock market indexes made gains on Wednesday after inflation data came in cooler than expected. The Nasdaq Composite rose 1.1% and the S&P 500 increased by 0.6%, while the Dow Jones Industrial Average stayed flat.

The core PCE, which is the inflation gauge watched by the Fed, rose just 0.2% in August for an annual rate of 3%. This was below the expected 0.3% and 3.3% respectively. As a result, Treasury yields dropped, and traders moved their next expected rate hike from October to December.

The tech sector was the main driver of the gains, with Alphabet rising 3.1% after signing an AI accord that includes audit commitments. Apple rose 2.4%, erasing Tuesday's drop, while Nvidia increased by 1.6%. Microsoft and Amazon also made gains, contributing to the overall rally.

However, not all stocks participated in the rally. Heavyweights Caterpillar and Goldman Sachs fell roughly 1% each, canceling out some of the gains from the tech sector. The average stock went nowhere, with equal-weight S&P 500 funds slipping slightly while cap-weighted versions rose.