Stocks Rally to Record Highs as July CPI Eases Inflation Concerns

U.S. stocks surged to fresh records on Wednesday, powered by a July CPI report that aligned closely with expectations and fueled a strong, broad-based rally. The S&P 500 climbed 1.1%, hitting an intraday peak of 6,446.55 before settling just below at 6,445.76. The Nasdaq Composite advanced 1.4%, topping out at 21,689.68 and closing at 21,681.90.

The CPI showed total inflation rising 0.2% month over month, while core CPI, excluding food and energy, gained 0.3% — both in line with forecasts. On a year-over-year basis, total CPI held steady at 2.7%, while core inflation ticked up to 3.1% from June’s 2.9%. Although certain components reflected tariff-driven price pressures, the overall readings were viewed as better than feared, helping to temper inflation worries.

The data reinforced expectations for a more accommodative Fed policy path. According to the CME FedWatch Tool, the probability of a 25-basis-point rate cut in September jumped to 94.4% from 85.9% a day earlier. Odds for a second cut in October climbed to 60.5%, while the likelihood of a third cut in December rose to 49.3%.

Rate-cut optimism sent investors into risk-on mode, with small caps leading the charge. The Russell 2000 soared 3.0% and the S&P Mid Cap 400 gained 2.3%. Large- and mega-cap stocks also rose, though more modestly. The S&P 500 Equal Weighted Index outpaced the market-cap-weighted benchmark with a 1.3% gain, while the Vanguard Mega Cap Growth ETF advanced 1.0%.

Market breadth was strikingly strong — on the NYSE, advancers outnumbered decliners by nearly 22 to 5, while on the Nasdaq the ratio was close to 3 to 1. All eleven S&P 500 sectors finished higher, led by communication services (+1.8%), technology (+1.4%), financials (+1.2%), materials (+1.1%), and industrials (+1.1%).

Airlines and chipmakers delivered standout performances. In the airline group, American Airlines soared 12.1%, Delta gained 9.2%, and Southwest rose 5.7%, boosting the Dow Jones Transportation Average by 3.0%. United Airlines and JetBlue posted double-digit gains as well. In semiconductors, the PHLX Semiconductor Index jumped 3.0%, driven by sharp advances in NXP Semiconductors (+7.3%), Microchip Technology (+5.8%), and Intel (+5.6%), offsetting a more subdued 0.6% rise in NVIDIA.

With little news beyond the CPI release, the market’s momentum held throughout the day. Whether the rally can extend may depend on investor sentiment over the next session, as Thursday’s calendar offers no major economic reports to drive direction.

The FTinvest 11 portfolio continued to push deeper into record territory today. After breaking through the 830 mark yesterday, the index set its sights on a new milestone at 840, and for most of the session it looked poised to reach it. However, a late-day pullback kept it just shy of that goal, with the index finishing at a new all-time high of 839, up 0.89% on the day.