Wall Street opens higher as traders bet on Fed rate cut despite hotter CPI

The upbeat open comes after the S&P 500 closed at record highs for a second consecutive session on Wednesday, helped by a sharp rally in Oracle shares

US stocks opened higher on Thursday, with the S&P 500 touching a fresh intraday record, as investors looked past a slightly stronger-than-expected inflation print and continued to price in a Federal Reserve rate cut next week.

The Dow Jones Industrial Average rose about 180 points, or 0.4%, in early trade. The S&P 500 gained 0.4% and moved to new record territory, while the Nasdaq Composite also advanced 0.4%.

Data from the Bureau of Labor Statistics showed consumer prices in August increased 0.4% month-on-month, higher than the 0.3% projected by economists. On a year-over-year basis, inflation rose 2.9%, matching forecasts. Core CPI, which excludes food and energy, rose 0.3% in the month and 3.1% annually, both in line with estimates.

The reading follows Wednesday’s surprise decline in producer prices, which slipped 0.1% in August, offering some comfort to markets ahead of the Fed’s policy meeting on September 17.

Weekly jobless claims, meanwhile, jumped more than expected to 263,000, reinforcing expectations that the central bank could ease policy. According to the CME FedWatch tool, traders continue to see a quarter-point rate cut as the most likely outcome, though bets on a larger half-point move have edged up.

“Markets are clearly leaning toward a cut. The question is whether the Fed goes 25 or 50 basis points,” said Jay Woods, chief market strategist at Freedom Capital Markets. “The bond market will be the key signal. If 10-year yields dip below 4%, stocks could rally further,” he added.

The upbeat open comes after the S&P 500 closed at record highs for a second consecutive session on Wednesday, helped by a sharp rally in Oracle shares. Oracle surged 36% in its best session since 1992, adding $244 billion in market capitalization after upbeat guidance for its cloud business. The move also lifted other AI-linked stocks including Broadcom, AMD and Micron.

In response to the softer labor market data (higher-than-expected jobless claims) and inflation figures that broadly met expectations, the yield on the 10-year US Treasury note briefly dropped below 4.00% — touching about 3.996% intraday.

This was the first time since April that the 10-year had fallen below that level. The yield later drifted back above 4% as markets digested the overall mix.

Investors are cautious ahead of a $22 billion auction of 30-year Treasury bonds. Recent long-term auctions have shown weak demand (with low bid-to-cover ratios and tepid end-user participation), which has raised concerns about how much investors want to hold longer-dated debt.