TLDR
- The Dow, S&P 500, and Nasdaq all rose around 1% on Friday, snapping a four-day losing streak
- August CPI came in at 0.4% monthly and 3.4% annually, slightly hotter than July’s reading
- Core CPI rose 0.3%, above the 0.2% estimate, cementing rate hike expectations
- Markets are now pricing in an 87% chance the Fed hikes rates by 25 basis points next week
- Oil prices pulled back Friday, with WTI crude falling to $100 per barrel after a volatile week
US stocks closed higher on Friday after August’s Consumer Price Index data came in hotter than expected, pushing up the odds of a Federal Reserve rate hike next week.
The S&P 500 rose 0.86%, the Nasdaq gained 0.96%, and the Dow Jones Industrial Average climbed 0.98%, adding around 509 points. All three indexes still posted losses for the week after a four-day losing streak heading into Friday.
The CPI report showed overall prices rose 0.4% on a monthly basis and 3.4% year-over-year. Both figures matched economist expectations but came in slightly warmer than July’s reading.
Core CPI, which strips out food and energy prices, rose 0.3% month-over-month. That was above the 0.2% estimate that analysts had forecast.
Rate Hike Odds Jump After Inflation Data
The hotter-than-expected core reading pushed traders to increase their bets on a Fed move. Markets are now pricing in roughly an 87% chance the Fed raises rates by 25 basis points at next week’s FOMC meeting, according to the CME’s FedWatch tool.
JUST IN: 🇺🇸 Odds of a Fed rate hike this month surge to 81%, per Kalshi traders. pic.twitter.com/SW4k887gwo
— Whale Insider (@WhaleInsider) September 12, 2026
That is up from 72% just one day earlier and 50% a week ago. The jump in rate hike probability removed some uncertainty from the market, which analysts say contributed to the afternoon rally.
“We’ve seen this trend multiple times where macro factors will induce a selloff, but it’s typically bought back pretty quickly when investors realize that they’re able to buy the market on the dip,” said Will Rhind, CEO of GraniteShares.
Treasury yields ticked higher after initially falling on the CPI print. The 10-year note yield finished the day just below 5%.
Oil Prices Pull Back After Volatile Week
Oil had a turbulent week, with Brent crude topping $108 per barrel and diesel reaching a record high of $6 per gallon. Those price moves added to inflation concerns throughout the week.
On Friday, however, oil prices cooled. WTI crude fell back to $100 per barrel. Brent crude futures also slowed their rise.
Saudi Arabia’s Ministry of Energy announced a temporary suspension of flows through the East-West Pipeline. Despite the news, oil futures were roughly unchanged on the day.
Inflation overall has been trending lower since May but remains well above the Fed’s 2% target.
Analysts noted that tech earnings have been a source of strength for the market. Rhind added that the market is “fundamentally strong, at least as far as earnings are concerned, and particularly tech earnings.”
The Fed’s policy meeting next week will be the next major test for equities.
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