All three key indices finished at three-month highs after a report put inflation at a lower-than-expected rate, reducing fears of a recession when combined with last week’s stronger-than-expected jobs report, CNBC reports.
The Dow Jones Industrial Average, S&P 500 and NASDAQ all finished at their highest levels since early may after inflation was recorded to have slowed and month-after-month consumer prices stayed flat. Core inflation, which strips out volatile food and fuel prices, also had a lower-than-expected increasing, prompting investors to invest more than they would if they saw a recession looming.
“The deceleration in the Consumer Price Index for July is likely a big relief for the Federal Reserve, especially since the Fed insisted that inflation was transitory, which was incorrect. … If we continue to see declining inflation prints, the Federal Reserve may start to slow the pace of monetary tightening,” said Nancy Davis, founder of Quadratic Capital Management.