U.S. stock index futures signaled a slightly higher open on Wednesday, suggesting Wall Street could extend the robust rally seen in the prior session.
Investors remain buoyed by expectations that the Federal Reserve will lower interest rates next month, following the release of consumer price inflation figures on Tuesday.
The data, which largely aligned with economists’ forecasts, has strengthened the market’s view that the Fed will cut rates by at least 25 basis points in September. U.S. Treasury Secretary Scott Bessent has urged policymakers to keep the option of a larger, 50 basis point cut on the table, citing recent weakness in the labor market.
According to CME Group’s FedWatch Tool, markets are now pricing in a 99.9% probability of a quarter-point rate reduction next month.
President Donald Trump has also continued to pressure Fed Chair Jerome Powell for rate cuts and recently warned he may allow a “major lawsuit” over renovations at the central bank’s headquarters to proceed.
Still, with no major U.S. economic releases scheduled for the day, trading activity could be more subdued. Attention will likely shift later in the week to reports on producer price inflation, retail sales, industrial production, and consumer sentiment.
After Monday’s choppy trading ended in modest losses, stocks staged a sharp rebound on Tuesday. The major indices more than recouped prior declines, with the S&P 500 and Nasdaq closing at fresh record highs. The Nasdaq surged 296.50 points, or 1.4%, to 21,681.90, the S&P 500 climbed 72.31 points, or 1.1%, to 6,445.76, and the Dow Jones Industrial Average advanced 483.52 points, or 1.1%, to 44,458.61 — all finishing near their session peaks.
The rally followed the Labor Department’s July consumer price index report, which showed a 0.2% increase after a 0.3% gain in June, matching expectations. Annual CPI growth remained at 2.7%, slightly below the forecasted uptick to 2.8%.
Core CPI, which excludes food and energy, rose 0.3% in July after a 0.2% increase in June — also in line with forecasts. On an annual basis, core inflation accelerated to 3.1% from 2.9%, above the expected 3.0%.
Despite the higher-than-expected core reading, traders remain confident that the data supports a September rate cut. “Although the Fed supposedly focuses more on the core number than on the headline number (in order to strip out the noisier components of inflation), we don’t believe that this report will deter the Fed from cutting rates next month,” said Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management.
Sector-wise, airline stocks soared, with the NYSE Arca Airline Index jumping 9.3% to its highest close in five months. Semiconductor shares also rallied, as the Philadelphia Semiconductor Index gained 3.0%. Strength was evident across multiple sectors, including steel, housing, banking, and computer hardware, as the broader market moved higher.
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