US stocks climb after inflation data supports rate cuts

STORY: U.S. stocks closed higher Wednesday as the latest inflation data reassured investors betting the Federal Reserve would start cutting U.S. interest rates next month.

The Dow gained six tenths of one percent, the S&P 500 climbed about four tenths to finish up for the fifth session in a row, and the Nasdaq rose a hair.

The labor department reported U.S. consumer prices rose moderately in July, and the annual increase in inflation slowed to below 3% for the first time since early 2021.

SimCorp Managing Director of Investment Decision Research Melissa Brown says it shows the economy is not too hot and not too cold.

“I think the CPI report that everybody's been focused on, and so they're trading based on that. I think it came in not too hot, so it wasn't high enough to kind of regenerate concerns that the economy is not slowing down and it wasn't low enough, I think to also to generate a concern that wow, maybe we really are in a recession.”

The odds of a 25 basis point interest rate cut by the Federal Reserve rose to 65% while the other 35% still see a larger 50 basis point reduction according to CME’s FedWatch tool.

Stocks on the move included Google-parent Alphabet, which lost 2.3% after a media report said that the U.S. Department of Justice is considering options that include breaking up the online search giant.

The report comes a week after a judge ruled the tech giant illegally monopolized the online search market.

Kellogg spin-off company Kellanova added 7.75% after privately-held Mars agreed to buy the Pringles maker for $36 billion.

And Charles Schwab added 4.5% after the broker posted solid account growth in July.