Futures tied to the Dow Jones, S&P 500, and Nasdaq were modestly higher early Wednesday, hinting that the momentum from Tuesday’s rally could carry into another session.
Investors remain focused on the Federal Reserve’s next move after fresh consumer price inflation figures reinforced expectations for a September interest rate cut. The latest data came in largely in line with forecasts, bolstering the case for at least a 25-basis-point reduction.
U.S. Treasury Secretary Scott Bessent has pushed for the Fed to leave room for a more aggressive 50-basis-point cut, pointing to recent softness in job market data. The CME Group’s FedWatch Tool now places the odds of a quarter-point cut at an overwhelming 99.9%.
President Donald Trump is also keeping the pressure on Fed Chair Jerome Powell to ease monetary policy, while threatening to allow a “major lawsuit” over renovations at the central bank’s headquarters to move forward.
With no key economic releases scheduled for Wednesday, trading could be quieter, though attention will soon turn to upcoming reports on producer prices, retail sales, industrial output, and consumer sentiment.
Tuesday’s session saw stocks surge after Monday’s mild declines. The S&P 500 and Nasdaq both closed at record highs, with the Nasdaq jumping 296.50 points, or 1.4%, to 21,681.90. The S&P 500 rose 72.31 points, or 1.1%, to 6,445.76, while the Dow gained 483.52 points, or 1.1%, to 44,458.61 — all settling near session highs.
The rebound followed the Labor Department’s July CPI report, showing a 0.2% monthly increase after a 0.3% rise in June. Annual CPI growth held steady at 2.7%, just shy of expectations for a slight acceleration.
Core CPI, which excludes food and energy, climbed 0.3% in July, matching estimates, after a 0.2% gain the month prior. Year-over-year core inflation accelerated to 3.1% from 2.9%, surpassing the 3.0% consensus forecast.
“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 gains were broad-based, with airlines leading the charge — the NYSE Arca Airline Index soared 9.3%, its best close in five months. Semiconductor stocks also rallied sharply, as the Philadelphia Semiconductor Index added 3.0%. Steel, housing, banking, and computer hardware shares advanced as well, lifting nearly all major sectors.
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