NEW YORK, Aug 12 (Reuters) – The S&P 500 and the Nasdaq scored record closing highs on Tuesday, as news that July inflation rose broadly in line with expectations bolstered bets on a Federal Reserve interest rate cut next month.
The Labor Department said the Consumer Price Index (CPI) rose 0.2% on a monthly basis in July, while annual inflation came in slightly below forecasts, drawing calls from U.S. President Donald Trump to lower interest rates.
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Line graph showing various measures of inflation and the Federal Reserve’s policy rate of interest.
Yields on shorter-dated Treasury bonds – a reflection of interest rate expectations – slipped and rate futures showed traders are giving an 88.8% chance that the Fed could lower rates by about 25 basis points in September.
“The CPI data is supportive for equities overall, getting some good news with the Fed looking more on track to cut in September and potentially more transitory inflation,” said Katherine Bordlemay, co-head of client portfolio management, fundamental equities at Goldman Sachs Asset Management.
“The first thing I’d guide is continue to lean into the theme of the big are getting bigger. We continue to have conviction around mega-tech and technology.”
Alphabet (GOOGL.O)
, opens new tab shares rose 1.2% as Perplexity made a $34.5 billion cash offer to buy the company’s Chrome browser.
Intel Corp (INTC.O)
, opens new tab climbed 5.6% after Trump said he met its CEO, Lip-Bu Tan, on Monday, praising Tan and calling the meeting “very interesting.”
Last week, Trump demanded Tan’s immediate resignation, calling him “highly conflicted” over his ties to Chinese firms.
The Dow Jones Industrial Average (.DJI)
, opens new tab rose 483.52 points, or 1.10%, to 44,458.61, the S&P 500 (.SPX)
, opens new tab gained 72.31 points, or 1.13%, at 6,445.76 and the Nasdaq Composite (.IXIC)
, opens new tab advanced 296.50 points, or 1.39%, to 21,681.90.
The quality of economic data remains a concern weeks after Trump fired the head of the Bureau of Labor Statistics following downward revisions to previous months’ nonfarm payrolls counts. Markets are monitoring developments around Trump’s nominee, E.J. Antoni, to the bureau commissioner post and potential candidates for the Fed’s top job.
Futures-options traders work on the floor at the American Stock Exchange (AMEX) at the New York Stock Exchange (NYSE) in New York City, U.S., August 12, 2025. REUTERS/Brendan McDermid Purchase Licensing Rights
“This is still early innings of this process and just as the Fed will be beginning to cut rates in the autumn, that’s when the inflation data will probably start to be registering some of these more direct tariff price increases and it’s going to complicate the rate-cutting decision,” said John Velis, a macro strategist at BNY.
Relief came as the U.S. and China extended their tariff truce until November 10, staving off triple-digit duties on each other’s goods.
U.S. stocks have rallied in recent weeks on the back of strong tech earnings, easing trade tensions, and increased rate cut expectations.
Inflows into U.S. stocks last week were the largest in two years, BofA Global Research data showed.
The Russell 2000 index (.RUT)
, opens new tab, tracking small-cap companies, advanced almost 3%.
An index tracking airline stocks (.SPLRCALI)
, opens new tab surged 8.87%, its biggest one-day rise in over a month after data showed airfares rose 4% in July.
Bank stocks rallied, with the S&P 500 Banks index (.SPXBK)
, opens new tab up 2.1%, as analysts said a steepening yield curve could help bank earnings as lenders could borrow cheap and lend at a higher rate.
Cardinal Health (CAH.N)
, opens new tab dropped 7% after the drug distributor said it will buy healthcare management firm Solaris for $1.9 billion.
Advancing issues outnumbered decliners by a 4.26-to-1 ratio on the NYSE. There were 484 new highs and 60 new lows on the NYSE.
On the Nasdaq, advancing issues outnumbered decliners by a 2.69-to-1 ratio.
The S&P 500 posted 27 new 52-week highs and 12 new lows while the Nasdaq Composite recorded 104 new highs and 96 new lows.
Volume on U.S. exchanges was 16.40 billion shares, compared with the 18.3 billion average for the full session over the last 20 trading days.
Reporting by Johann M Cherian, Sanchayaita Roy and Purvi Agarwal in Bengaluru and Saeed Azhar in New York; Editing by Arun Koyyur, Maju Samuel and Richard Chang
Our Standards: The Thomson Reuters Trust Principles.
Saeed Azhar is a Reuters financial journalist and part of the U.S. banking team, which covers Wall Street’s biggest banks. He focuses on Goldman Sachs and Bank of America, and also writes about regional banks. Before moving to New York in July 2022, he led the finance team in the Middle East from Dubai, and also worked in Singapore, covering Southeast Asia finance.
