Dow Smashes Through 46,000 in Historic Rally—But Is the Fed’s Rate-Cut Magic Real or Risky?.Dang

New York —
Stocks hit record highs Thursday after August inflation data mostly matched expectations, reaffirming investors’ hopes that the Federal Reserve will cut interest rates in September.

The Dow rose 617 points, or 1.36%, and closed at 46,108, crossing the 46,000-point mark for the first time.

It’s a symbolic milestone for the blue-chip index, and emblematic of the stock market’s persistent rise despite tariff uncertainty and signs of weakness in the economy.

The broader S&P 500 rose 0.85%, and the tech-heavy Nasdaq gained 0.72%. All three major indexes closed at record highs.

Inflation data released Thursday morning showed consumer prices ticked up in August. However, the rise in headline annual inflation and a core measure of inflation that excludes food and energy came in in line with Wall Street’s expectations.

Markets cheered as data showed a relatively in line inflation report that paves the way for the Fed to cut interest rates this month.

“Thursday’s CPI was in line with expectations and will not derail the Federal Reserve’s expected rate cut at the September meeting,” Skyler Weinand, chief investment officer at Regan Capital, said in an email.

The Russell 2000, an index of smaller companies that are more sensitive to interest rates, soared 1.83% and hit its highest level this year as investors embraced optimism about a Fed rate cut in September.

“Stocks are in full-on rally mode … thanks to an ‘all-clear’ signal from the CPI report,” Steve Sosnick, chief strategist at Interactive Brokers, said in a note.

While headline annual inflation ticked up, concerns about the job market are also elevated, meaning the Fed will likely cut rates by a quarter-point in September, according to Bill Adams, chief economist at Comerica Bank.

Labor Department data released on Thursday showed one of the biggest weekly increases in jobless claims seen in more than a year.

Related article: Economists expected inflation to heat up in August, in part because businesses were passing along higher costs from tariffs.
Double whammy for Americans: Inflation continues to rise as jobs outlook grows weaker

Investors flocked to bonds because of signs of a slowdown in the labor market. That pushed Treasury yields lower: The 10-year Treasury yield briefly fell below 4% and hit its lowest level since April. Bond prices and yields move in opposite directions.

Traders are pricing in a 93% chance the Federal Reserve will cut its benchmark interest rate by a quarter point at its policy meeting next week, with a 7% chance of a jumbo half-point cut.

Elsewhere in markets, Warner Bros. Discovery shares (WBD) surged 29% after reports that Paramount Skydance is preparing a bid for the company.