Good news in US inflation report boosts chances Fed won’t hike rates

Good economic news boosted Wall Street’s main indexes on Wednesday, as a softer-than-anticipated inflation reading buoyed hopes that the Federal Reserve might not hike rates as soon ⁠as next month.A commerce department report ⁠showed the personal consumption expenditures (PCE) ​price index stood at 3.4% on an annual basis in August against estimates of 3.7%, per economists polled by Reuters.Separately, second-quarter GDP data – the broadest measure of the economy’s health – showed that the US economy grew at a solid clip, driven ⁠by robust consumer spending and business investment related to the buildout of AI infrastructure.“The market had been tracing out a bullish formation, meaning the price pattern suggested that any positive catalyst could trigger a move higher and that’s exactly ⁠what happened,” said Sam Stovall, chief investment strategist at CFRA Research.Traders now see a roughly 35% chance of an October rate hike, down from about ​a 45% chance seen before the data, according to data ‌compiled by LSEG. The Federal Reserve is under pressure to cut rates from the White House after raising them earlier this month for the first time since 2023.Inflation has emerged as the top issue for voters in the run-up to the midterm elections with Donald Trump receiving poor marks for his handling of the economy.At 09.55am ET, the Dow Jones industrial average rose 50.58 points, or 0.10%, to 51,400.50, the S+P 500 gained 33.17 points, or 0.43%, to 7,704.01 and the Nasdaq Composite gained 193.57 points, or 0.72%, to 26,991.11.Five of the 11 S&P 500 sectors were trading higher, with information technology and energy leading gains.Despite weakness in September, driven by bond market volatility and elevated oil prices amid the US-Iran conflict, the benchmark S&P 500 and the ‌Nasdaq were on pace for a second straight quarterly advance, if gains hold.On ​Wednesday, the yield on the 10-year treasury bond held steady at 5.246%, a day after hitting its highest since June 2007. Crude oil prices rose on the day, with the December contract for Brent crude futures moving higher.There was also positive news from the jobs market. ADP, the US’s largest payroll supplier, said private employers added 90,000 jobs in September, higher than expected and up from 36,000 in August.On Friday, the labor department will release its latest monthly jobs tally, which is expected to show a gain of 84,000 for September, down from 162,000 in the prior month.Reuters contributed to this story.