S&P 500, Nasdaq near record highs on hopes of Fed rate cut in September

The benchmark S&P 500 and the Nasdaq hovered near record highs on Wednesday as investors were increasingly confident that the Federal Reserve could restart its monetary policy easing cycle next month. 

Signs that US tariffs on imports have not fully filtered into headline consumer prices came as a relief for investors this week as they scour for insights on the impact trade uncertainty has had on the economy. 

Despite data showing underlying price pressures were on the rise, markets also factored in recent weakness in the job market and a shake-up at the Federal Reserve as they leaned in favor of a potential dovish move by the central bank in September. 

Traders are now fully pricing in a 25 basis points interest rate cut, according to the CME's FedWatch Tool, up from 89.2 per cent last week. The central bank last lowered borrowing costs in December. 

Treasury Secretary Scott Bessent also said he thought an aggressive half-point cut was possible given recent weak employment numbers. 

Stagflation "was the first word that came to my mind when I saw this CPI report yesterday," said Mark Hackett, chief market strategist at Nationwide, referring to Tuesday's data coming on the heels of a number of other reports pointing to a cooling economy. 

"The slowdown that we're seeing is probably fairly temporary, at least at this point. So inflation is something that we're absolutely worried about because we saw that uptick." At 12:18 p.m. ET, the Dow Jones Industrial Average rose 363.26 points, or 0.82 per cent, to 44,821.52, the S&P 500 gained 9.34 points, or 0.15 per cent, to 6,455.15 and the Nasdaq Composite advanced 15.77 points, or 0.07 per cent, to 21,697.97. 

The blue-chip Dow was within 1 per cent away from an all-time high and the Russell 2000 index, which tracks rate-sensitive small-cap companies, added 0.1.3 per cent to hit a six-month high. 

Investors were also taking notice of other sectors following the recent tech-led rally in US stocks that have pushed valuations of the S&P 500 above long-term averages. 

Healthcare stocks, which have been beaten down for much of the year, led gains among the 11 S&P 500 sectors with a 1.4 per cent rise, while the tech-heavy Nasdaq 100 index was marginally lower. 

Later in the day, investors will scrutinize remarks of a number of policymakers, especially Chicago Fed President Austan Goolsbee. 

CoreWeave, which is backed by Nvidia, slumped 17.6 per cent after the AI data center operator reported a bigger-than-expected quarterly net loss. 

Eyes are also on developments surrounding the China revenue-sharing deal the US government signed with top chipmakers, which the White House said could be expanded to others in the sector. 

Paramount Skydance jumped 30 per cent. The company won exclusive broadcasting rights to the Ultimate Fighting Championship for seven years earlier this week. 

In geopolitics, traders also were keen on a meeting between Trump and Russia's Vladimir Putin on the Ukraine conflict scheduled on Friday. 

Advancing issues outnumbered decliners by a 2.96-to-1 ratio on the NYSE and by a 2.28-to-1 ratio on the Nasdaq.

The S&P 500 posted 37 new 52-week highs and two new lows, while the Nasdaq Composite recorded 131 new highs and 49 new lows.