Encouraging inflation report clears path for rate cuts
Wall Street advanced further on Wednesday, with the S&P 500 rising 0.2% and on track for a second consecutive record close. While the Nasdaq Composite held steady and the Dow Jones Industrial Average dipped 221 points (0.5%) by mid-afternoon, investor sentiment remained optimistic, buoyed by slowing inflation and explosive growth projections tied to artificial intelligence.
Stocks have been gaining ground as markets hope for a rare economic balance: growth that cools just enough to prompt the Federal Reserve to cut interest rates, but not so much that it triggers a recession. A key step toward that came Wednesday with a report showing wholesale inflation in August unexpectedly slowed, boosting confidence that the Fed might ease policy as soon as next week.
“The report essentially rolled out the red carpet for a Fed rate cut next week,” said Chris Larkin, managing director at E-Trade from Morgan Stanley. Traders now widely expect a quarter-point rate cut at the Fed’s upcoming meeting, pending confirmation from Thursday’s consumer price index (CPI) report.
Oracle leads tech rally with AI-driven forecast
Tech stocks surged, led by Oracle, which jumped 34.4% after forecasting dramatic revenue growth tied to AI demand. CEO Safra Catz announced four multibillion-dollar contracts signed during the quarter and projected a 77% rise in cloud infrastructure revenue this fiscal year to $18 billion, with expectations of hitting $144 billion by 2030.
“AI changes everything,” said Oracle Chairman Larry Ellison, reinforcing Wall Street’s bullish stance on the sector. Despite narrowly missing earnings estimates, Oracle was on pace for its best day since 1992.
Nvidia rose 3.2%, continuing its strong performance as a major beneficiary of the AI boom, while Taiwan Semiconductor Manufacturing Co. gained 3.5% after reporting a 34% year-over-year revenue jump in August. Both helped lift the S&P 500.
Mixed corporate results across sectors
Outside of tech, Novo Nordisk added 0.2% after announcing it will cut 9,000 jobs, mostly in Denmark, to reduce costs amid growing competition in the weight loss drug market. Meanwhile, Apple fell 3%, dragging on both the Dow and the S&P 500, as investors were underwhelmed by its new iPhone lineup, which lacked major innovations.
Chip design company Synopsys dropped sharply by 35.5% after missing profit expectations and issuing a weak outlook for the current quarter. On a brighter note, Klarna made its public debut on the New York Stock Exchange, with shares rising 15% above their $40 IPO price.
Global markets and bond yields respond to inflation
International markets showed mixed performance. In Asia, South Korea’s Kospi rose 1.7% and Hong Kong’s Hang Seng added 1%, while European indexes were more subdued. In the bond market, the yield on the 10-year Treasury fell to 4.03% from 4.08%, reflecting expectations that rate cuts are becoming more likely following the benign wholesale inflation report.
With inflation finally showing signs of cooling and AI-fueled optimism lifting tech, Wall Street remains focused on Thursday’s CPI reading as the next major signal in shaping the Fed’s policy path for the rest of the year.
