Wall Street Finds Relief as Inflation Data Meets Expectations

Wall Street ended the week on a positive note after fresh U.S. inflation data reassured investors and calmed fears of runaway price growth. The latest figures showed consumer spending rising slightly more than forecast in August, while the inflation rate ticked up to 2.7% from 2.6% in July — exactly in line with economists’ expectations.

The steady reading fueled hopes that the Federal Reserve can continue with its measured approach to interest rate cuts. Treasury yields barely budged, keeping borrowing costs stable, while gold prices firmed as traders sought safe-haven assets on expectations of further monetary easing.

The market response was swift: the Dow Jones Industrial Average gained 0.70%, the S&P 500 rose 0.46%, and the Nasdaq Composite added 0.18%. Companies with strong domestic exposure benefited, with truck maker Paccar surging more than 4%, topping the S&P 500, while pharmaceutical giant Eli Lilly advanced nearly 2%.

Still, clouds linger on the horizon. New White House tariffs — including 100% duties on imported branded drugs and levies on goods ranging from trucks to kitchen cabinets — stirred renewed fears of a trade war. The move complicated inflation forecasts, leaving Federal Reserve officials grappling with the impact of tariffs on price stability.

Bond markets reflected the uncertainty. The yield on 10-year U.S. Treasuries edged up to 4.183%, while the 30-year yield eased fractionally to 4.7516%. Analysts noted that income and spending proved more resilient than expected, reinforcing the view that the American consumer is holding steady despite headwinds.

Meanwhile, gold continued to shine. Spot prices climbed 0.54% to $3,769.05 an ounce, buoyed by expectations that lower interest rates will enhance its appeal. Traders are now pricing in an 85% chance of a rate cut in October and a 62% probability of another in December.

The Federal Reserve cut rates for the first time this year just last week and signaled more easing ahead. But policymakers remain cautious. Fed Chair Jerome Powell offered few hints on the exact timing of cuts, stressing the delicate balance the central bank must strike. Richmond Fed President Thomas Barkin acknowledged that tariffs have clouded inflation forecasts, while other Fed officials continue to weigh in on the outlook.

For now, Wall Street is taking comfort in inflation numbers that avoided unpleasant surprises, providing a much-needed dose of stability to close out a volatile week.