By Sinead Carew and Shashwat Chauhan
(Reuters) – U.S. stocks closed higher on Wednesday, lifted by technology shares, offsetting investor disappointment in an early-morning inflation report that dampened hopes the Federal Reserve will cut interest rates by 50 basis points next week.
The S&P 500 technology index fell, but rose after a lower open, helped by a 6.3% surge by Nvidia (NASDAQ: ), which makes artificial intelligence chips. The U.S. government is considering allowing Nvidia to export advanced chips to Saudi Arabia, Semaphore reported.
Political developments also helped lift market sentiment the day after Democratic candidate Kamala Harris put Republican rival Donald Trump on the defensive in a hostile US presidential debate.
Earlier, the Labor Department said the consumer price index rose 0.2% last month, in line with July. The core CPI, which strips out the volatile food and energy components, rose 0.3% on a monthly basis, beating economists’ expectations for a 0.2% gain.
Traders changed their bets to an 85% chance of a 25 basis point rate cut by the Fed from 66% on Tuesday and the probability of a 50 basis point rate cut fell to 13% from 34% a day earlier, according to CME Group’s (NASDAQ:) FedWatch tool.
“The market was probably looking for a weaker inflation reading which would give the Fed more reason to cut rates by 50 basis points next week,” said Jack Janacewicz, portfolio manager at Natixis. “This report was in line with expectations slightly above expectations. As a result, this puts some pressure on the Fed to cut rates by only 25 basis points.”
As the day progressed, investors may have come to terms with the inflation numbers, according to Janasiewicz, who also pointed to technology as the most prominent factor “that helped support the broader market.”
According to preliminary data, the Standard & Poor’s 500 index rose 56.42 points, or 1.03%, to close at 5,551.94 points, while the Nasdaq Composite index rose 365.06 points, or 2.14%, to close at 17,390.94 points. The Dow Jones Industrial Average rose 101.43 points, or 0.25%, to close at 40,838.39 points.
During the session, major U.S. banks extended declines that began on Tuesday, due to warnings of a decline in trading revenue, a slower-than-expected recovery in investment banking, and an expected hit to interest income due to impending interest rate cuts.
After the presidential debate, the odds on Trump to win were 48 cents on online betting site PredictIt, and 55 cents for Harris to win.
As a result, stocks that were expected to do well under Trump’s presidency fell, with cryptocurrency, blockchain and prison operator stocks falling. Shares of Trump Media and Technology Group fell.
Meanwhile, solar stocks, seen as benefiting from Harris’s management, attracted some buyers with shares of First Solar (NASDAQ: ), Sunrun (NASDAQ: ), and SolarEdge Technologies (NASDAQ: ) rising.
While the debate has not provided Wall Street with much clarity on key policy issues, some market watchers see Harris’s proposals to raise the corporate tax rate as likely to hurt corporate profits, while Trump’s tougher stance on tariffs could stoke inflation.
GameStop (NYSE:) shares fell sharply after the video game retailer said it had placed an offering request for up to 20 million shares and reported lower second-quarter revenue.
Shares of lithium miners jumped after Chinese battery giant CATL said it plans to make adjustments to its lithium carbonate production in Yichun. Albemarle Shares of General Electric Mining (NYSE:GE), one of the world’s largest lithium miners, jumped.