Stocks Are Up After Hot Inflation Data. Here Is Why That Makes Sense.

TLDR

• August CPI showed inflation rose 0.4% monthly and 3.4% annually, in line with expectations
• Markets now price in an 87% chance the Fed raises rates by 25 basis points next week
• The Dow, S&P 500, and Nasdaq each rose roughly 1%, breaking a four-day losing streak
• Analysts say the rally reflects reduced uncertainty rather than enthusiasm for a rate hike
• Oracle shares popped over 2% after reporting strong cloud computing growth

U.S. stocks climbed on Friday after the latest inflation data came in hot, pushing the odds of a Federal Reserve rate hike next week to near certainty.

The Dow Jones Industrial Average gained around 506 points, or 1%. The S&P 500 rose 1% and the Nasdaq Composite climbed 1.2%. All three indexes broke a four-day losing streak.

The moves came after the Consumer Price Index showed overall prices rose 0.4% on a monthly basis and 3.4% on an annual basis. The numbers matched economists’ forecasts but came in slightly hotter than July’s reading.

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