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.
Why Stocks Rose on Bad Inflation News
It might seem odd that stocks rallied after hotter inflation data. The answer comes down to certainty.
David Wagner, head of equities at Aptus Capital Advisors, said the report removed a major unknown for investors. “It now feels like a well-signaled September hike,” he said.
Wagner added that a rate hike could be seen as a sign the Fed is ahead of the problem. That could reduce inflation uncertainty and lower the risk of a much larger tightening cycle down the road.
In short, investors dislike uncertainty more than they dislike rate hikes. With the path now clearer, stocks found room to rise.
BREAKING: The odds of a September interest rate hike surge to 79% after US CPI inflation hits 3.4% in August.
It is incredible to think that, at the start of 2026, markets were expecting the Fed’s 3rd interest rate CUT of the year this month.
Inflation roars on and “higher for… https://t.co/tpoSKnyRuu pic.twitter.com/397cPkrWm2
— The Kobeissi Letter (@KobeissiLetter) September 11, 2026
Markets are now pricing in an 87% chance the Fed raises rates by 25 basis points at next week’s FOMC meeting. That is up from 72% just one day ago and 50% a week ago, according to the CME FedWatch tool.
Oil Prices Add to Inflation Pressure
Rising oil prices have added fuel to inflation concerns in recent weeks. Brent crude topped $108 per barrel before easing back on Friday.
Diesel prices hit a record high of $6 per gallon. That kind of energy cost increase tends to filter through to broader consumer prices over time.
While inflation has trended lower since May, it remains well above the Fed’s 2% target. The oil spike complicates that picture heading into the Fed’s decision.
Friday’s CPI report was the last major inflation reading before Fed policymakers meet next week.
Oracle shares rose more than 2% on Friday after the database software company posted strong cloud computing growth in its latest earnings report. The stock trimmed some gains later in the session but remained in positive territory.
The rally across major indexes on Friday came as traders digested what the inflation data means for monetary policy in the weeks ahead.
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