New York stocks rebounded for the first time in five sessions as the market digested a decline in international oil prices and a consumer price index (CPI) that did not stray far from expectations. While core inflation came in higher than forecast, strengthening expectations for a U.S. Federal Reserve (Fed) rate hike, the cooling of the oil price surge supported investor sentiment.
On the 11th (local time) at the New York Stock Exchange, the Standard & Poor's (S&P) 500 index rose 65.28 points, or 0.86%, to close at 7,656.98.
The tech-heavy Nasdaq composite gained 251.31 points, or 0.96%, to 26,333.04, and the Dow Jones Industrial Average added 509.19 points, or 0.98%, to 52,573.29.
A drop in international oil prices, which had been climbing steeply, gave the market a sense of relief. On the London ICE Futures Exchange, November Brent crude settled at $104.61 per barrel, down 2.8% from the prior day. On the New York Mercantile Exchange, October West Texas Intermediate (WTI) fell 2.4% to $100.05 per barrel. It was their first declines in six and nine sessions, respectively.
Reports that Middle Eastern countries are seeking a temporary agreement over ship traffic in the Strait of Hormuz also prompted profit-taking after the recent surge.
By stock, technology shares, led by big tech, were strong. Alphabet (1.77%), Apple (1.75%), Tesla (0.52%), and Palantir (0.83%) all rose. Dell Technologies jumped 11.98%.
By contrast, some semiconductor stocks were weak, including Nvidia (-0.09%), Micron (-0.22%), and SanDisk (-3.50%).
The U.S. CPI for August released that day rose 0.4% from the prior month and 3.4% from a year earlier, in line with market expectations. However, core CPI, which excludes food and energy, rose 0.3% from the prior month, above the 0.2% expected.
With core inflation coming in higher than expected, expectations for a Fed rate hike strengthened further. According to CME FedWatch, the probability in the fed funds futures market that the Fed will raise the benchmark rate by 0.25 percentage point at the Federal Open Market Committee (FOMC) on the 15th–16th rose to 86.3% in the afternoon from 72.4% the previous day.
As rate hike expectations grew, U.S. Government Bonds yields also rose. The 2-year note, sensitive to currency policy, climbed 0.073 percentage point to 4.623%, a record high since July 2024. The 10-year yield briefly rose to the 4.99% range right after the CPI release, approaching 5%, before easing to the low-to-mid 4.9% range.
Thomas Martin, senior portfolio manager at Globalt Investments, said of the Fed's likelihood of raising rates next week, "It is close to a foregone conclusion," adding, "The Fed will make the right decision and raise rates, and that is positive for tamping down inflation."
Seema Shah, chief global strategist at Principal Asset Management, said, "The debate has quickly shifted from whether the Fed will hike to how many hikes will ultimately be needed in this cycle," adding, "I do not see the Fed stopping after just one hike."