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 Consumer Price Index (CPI) rose 0.2% on a monthly basis in July, while annual inflation came in slightly below forecasts, from U.S. President Donald Trump to lower interest rates. 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 shares rose 1.2% as Perplexity made a $34.5 billion offer to buy the company's Chrome browser. Intel Corp 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 resignation, calling him "highly conflicted" over his ties to Chinese firms. The Dow Jones Industrial Average rose 483.52 points, or 1.10%, to 44,458.61, the S&P 500 gained 72.31 points, or 1.13%, at 6,445.76 and the Nasdaq Composite 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 previous months' nonfarm payrolls counts. Markets are monitoring developments around Trump's nominee to the bureau commissioner post and for the Fed's top job. "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 trade agreement 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, tracking small-cap companies, advanced almost 3%. An index tracking airline stocks 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 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 dropped 7% after the drug distributor said it would sell its 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.

S&P 500, Nasdaq end at record closing highs as moderate inflation lifts rate hopes

The S&P 500 and Nasdaq reached record closing highs on August 13, 2025, driven by moderate inflation data showing a 0.2% monthly rise in July, slightly below forecasts. This bolstered expectations of a Federal Reserve interest rate cut in September, with rate futures indicating an 88.8% chance of a 25 basis point reduction. Market sentiment improved due to strong tech earnings, easing trade tensions following a U.S.-China trade agreement extension to November 10, and inflows into U.S. stocks reaching their highest level in two years. The Dow Jones rose 1.10%, the S&P 500 gained 1.13%, and the Nasdaq advanced 1.39%. Small-cap and airline stocks performed well, with the Russell 2000 up nearly 3% and airline stocks surging 8.87%. Bank stocks rose as a steepening yield curve supported lending margins. Cardinal Health reported a $1.9 billion sale of its Solaris healthcare management unit, leading to a 7% drop in its share price. The market saw a 4.26-to-1 advance-decline ratio on the NYSE and a 2.69-to-1 ratio on the Nasdaq, with numerous new 52-week highs recorded.