Market Rallies on Fed Rate Cut Speculation as Inflation Data Softens

US equities advanced Wednesday as traders priced in near-certain odds of Federal Reserve easing following cooler-than-expected inflation figures. The Dow Jones Industrial Average led gains with a 0.8% climb, while the S&P 500 and Nasdaq Composite pared early advances to finish marginally higher.

Treasury yields retreated after July's CPI report showed inflationary pressures rising less than forecast, cementing expectations for policy accommodation. "The door is wide open for a 50 basis point cut in September," said Scott Bessent, who called for aggressive 150-175bp reductions. Fed funds futures now reflect a 100% probability of easing at the next FOMC meeting.

Market participants await Thursday's PPI data and Friday's retail sales figures for further confirmation of economic cooling. The dollar weakened across G10 currencies as risk assets found support in the dovish repricing.