Weekly Recap: Hot Inflation Should Have Hurt Stocks. Instead, the Market Rallied 1%

TLDR

• The Dow, S&P 500, and Nasdaq all rose around 1% on Friday, snapping a four-day losing streak
• August CPI came in at 0.4% monthly and 3.4% annually, slightly hotter than July’s reading
• Core CPI rose 0.3%, above the 0.2% estimate, cementing rate hike expectations
• Markets are now pricing in an 87% chance the Fed hikes rates by 25 basis points next week
• Oil prices pulled back Friday, with WTI crude falling to $100 per barrel after a volatile week

US stocks closed higher on Friday after August’s Consumer Price Index data came in hotter than expected, pushing up the odds of a Federal Reserve rate hike next week.

The S&P 500 rose 0.86%, the Nasdaq gained 0.96%, and the Dow Jones Industrial Average climbed 0.98%, adding around 509 points. All three indexes still posted losses for the week after a four-day losing streak heading into Friday.

The CPI report showed overall prices rose 0.4% on a monthly basis and 3.4% year-over-year. Both figures matched economist expectations but came in slightly warmer than July’s reading.

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