Today’s News

All three major U.S. stock indexes closed higher on Wednesday, driven by strong gains in the technology sector. This uptick helped offset investor disappointment following a morning inflation report that dampened hopes for a significant interest rate cut by the Fed next week. 

The S&P 500 technology index rose 3.3%, led by an 8% surge in Nvidia shares. The AI chipmaker’s stock jumped after a Semafor report suggested that the U.S. government might allow the company to export advanced chips to Saudi Arabia. 

Political developments also influenced market sentiment, as the presidential debate between Democratic candidate Kamala Harris and Republican rival Donald Trump added to the day’s market dynamics. 

Inflation Data Shifts Market Expectations for Fed Rate Cut

Earlier in the day, the U.S. Labor Department reported that the consumer price index (CPI) rose 0.2% in August, consistent with July’s increase. However, the core CPI, which excludes volatile food and energy prices, rose 0.3% for the month, slightly above economists’ expectations of a 0.2% increase. 

In reaction, traders adjusted their expectations for the Federal Reserve’s next move. The likelihood of a 25 basis point rate cut increased to 85%, up from 66% on Tuesday, while the probability of a more aggressive 50 basis point cut dropped to 15% from 34%, according to the CME Group’s FedWatch tool. 

“Maybe the market was looking for a softer inflation print which would give the Fed more reason to cut by 50 basis points next week,” said Jack Janasiewicz, portfolio manager at Natixis. “This report was in-line to slightly hotter than expectations. As a result, this puts a bit of pressure on the Fed to cut by only 25 basis points.” 

As the trading day progressed, investors seemed to come to terms with the inflation data, with technology stocks playing a key role in lifting the broader market. The Dow Jones Industrial Average rose 124.75 points (0.31%) to 40,861.71, the S&P 500 gained 58.61 points (1.07%) to 5,554.13, and the Nasdaq Composite climbed 369.65 points (2.17%) to 17,395.53. 

Six of the S&P 500’s 11 major sectors finished higher, led by consumer discretionary stocks, which rose 1.3%. However, energy stocks fell 0.93%, followed closely by consumer staples, down 0.88%. The financial sector also pared its losses to close down just 0.39% after being down more than 2% earlier in the session. 

Among individual stocks, American Express saw gains after its chief financial officer stated that credit conditions were strong and consumer spending remained stable. Major banks like Goldman Sachs and JPMorgan also recovered from earlier declines, ending up 0.9% and 0.8%, respectively, following concerns about trading revenue declines and slower-than-expected recoveries in investment banking. 

Following the presidential debate, betting markets showed increased confidence in a Harris victory, with PredictIt contracts rising from 53 cents to 57 cents. In contrast, contracts for a Trump win fell from 52 cents to 48 cents. As a result, stocks expected to perform well under a Trump administration, such as those related to cryptocurrency, blockchain, and prison operators, saw declines. Trump Media & Technology Group shares fell 10.5%. 

On the other hand, solar stocks, which are expected to benefit from a Harris administration, rallied. First Solar surged 15.2%, Sunrun climbed 11.3%, and SolarEdge Technologies gained 8.5%. 

While the debate offered little clarity on major policy issues, some analysts believe that Harris’s proposal to raise the corporate tax rate could weigh on company profits, whereas Trump’s tougher stance on tariffs could spur inflation. 

Elsewhere, GameStop shares dropped nearly 12% after the company announced a share offering of up to 20 million shares and reported lower second-quarter revenue. Lithium miners, however, saw a boost after China’s CATL said it would adjust lithium carbonate production, leading to a 13.6% jump in Albemarle shares. 

Overall, advancing issues outnumbered decliners on both the NYSE and Nasdaq, with a total trading volume of 12.19 billion shares on U.S. exchanges, compared to the 20-day moving average of 10.80 billion. 

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