Cooler-than-expected inflation data reduced Fed rate hike bets, boosting equities as AI-driven stocks surged.
The S&P 500 and Nasdaq posted their third consecutive weekly gain, driven by easing inflation concerns and strong performance in AI-related stocks like Intel and Nvidia. The S&P 500 closed at a record high, surpassing 7,800 for the first time, while the Dow declined nearly 0.6% for the week.
July’s consumer price index rose 0.1%, matching estimates, with annual inflation easing to 3.4%. The producer price index remained unchanged for the month, below the expected 0.2% increase. Both reports reinforced expectations that the Federal Reserve may hold rates steady in September, with markets pricing a 67% chance of no hike, up from 55% a week earlier.
Treasury yields fell as traders dialed back rate hike expectations, supporting equities. The Nasdaq outperformed, fueled by gains in tech and AI sectors.