Nasdaq, S&P 500 Notch Record Highs as September Fed Rate Cut Bets Increase

04:57 PM EDT, 08/12/2025 (MT Newswires) -- The Nasdaq Composite and the S&P 500 hit fresh record highs on Tuesday as expectations for a Federal Reserve interest rate cut in September grew following the consumer inflation report.

The Nasdaq climbed 1.4% to 21,681.9, eclipsing its previous record close hit Friday. The S&P 500 rose 1.1% to 6,445.8, topping its previous closing high reached late last month. The Dow Jones Industrial Average advanced 1.1% to 44,458.6. All sectors ended higher, led by communication services.

In economic news, US consumer inflation slowed down last month on a sequential basis, while the annual core rate jumped above 3%, official data showed.

"While inflationary pressures are heating up, the labor market has shown clear signs of weakening," Thomas Feltmate, senior economist at TD Economics, said in a report. "With the policy rate still well in restrictive territory and inflation expectations remaining well anchored, the prudent move for the Fed is to prioritize the employment side of its dual mandate and provide some rate relief in the months ahead."

The odds that the central bank's Federal Open Market Committee will reduce its benchmark lending rate by 25 basis points next month jumped to 94% Tuesday from 86% Monday, according to the CME FedWatch tool.

At the start of this month, official data showed the US economy added fewer jobs than projected in July, while gains in the previous two months were revised down sharply.

The official US producer prices report for last month is scheduled to be released Thursday.

The central bank should maintain its monetary policy for now as inflation remains "too high," Kansas City Fed President Jeff Schmid said.

A voter on the FOMC this year, Schmid said that while President Donald Trump's reciprocal tariffs seem to be having limited effects on prices, their eventual impact on inflation "is almost impossible to anticipate."

"Overall, I am anticipating a relatively muted effect of tariffs on inflation, but I view that as a sign that policy is appropriately calibrated rather than a sign that the policy rate should be cut," he said in remarks prepared for delivery at a conference.

Separately, Richmond Fed President Tom Barkin said that uncertainty around the economy is lessening, with the path ahead expected to be "bumpy, but bearable."

"We may well see pressure on inflation, and we may also see pressure on unemployment, but the balance between the two is still unclear," Barkin said. "As the visibility continues to improve, we are well positioned to adjust our policy stance as needed."

US small business optimism rose more than expected in July amid hopes that owners will benefit from legislative and trade clarity, a survey by the National Federation of Independent Business showed.

US Treasury yields were mixed, with the 10-year rate rising 0.5 basis point to 4.29% and the two-year rate dropping 4.6 basis point to 3.74%.

West Texas Intermediate crude oil was down 1.1% at $63.24 a barrel in Tuesday late-afternoon trade.

The Organization of the Petroleum Exporting Countries lifted its global oil demand projection for 2026 and raised its world and US economic growth forecasts for this year.

The cartel expects the global economy to continue to expand at a "relatively solid level" through the 2025 second half and into next year, with trade tensions easing slightly as several countries struck trade deals with the US before Trump's Aug. 1 deadline. However, several major economies, including India, Brazil and Canada have yet to finalize agreements with the US, the OPEC said.

On Monday, Trump signed an executive order to extend the tariff suspension on China for another 90 days.

In company news, On Holding (ONON) posted stronger-than-expected second-quarter sales, prompting the Swiss sneaker maker to raise its full-year guidance. The company's US-listed shares soared nearly 9%.

Cardinal Health (CAH) raised its full-year earnings outlook after its fiscal fourth-quarter bottom line rose above market expectations. The drug distributor agreed to acquire urological healthcare management company Solaris Health in a deal worth $1.9 billion. Cardinal Health (CAH) shares fell 7.2%, the steepest decline on the S&P 500.

Boeing (BA) shares rose 2.9%. The US plane maker on Tuesday reported deliveries for July that fell sequentially and lagged behind Airbus' tally, though it booked more orders than its European rival Airbus.

Gold was down 0.1% at $3,400.40 per troy ounce, while silver rose 0.4% to $37.92 per ounce.

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