S&P 500 hits record as PPI cools to 4.7%; September rate-hike odds fall to 35%

For markets, the headline record is less important than the repricing of the Fed path. Back-to-back softer inflation prints have compressed rate-hike expectations, with CME data showing a 35% probability for September, down from 50% two days earlier. The move in long-dated Treasury yields and oil prices suggests the market is beginning to price a more dovish policy trajectory.

On Thursday, August 13, 2026, U.S. equities set fresh records after a cooler-than-expected wholesale inflation print convinced traders that the Federal Reserve is less likely to raise interest rates at its September meeting. The S&P 500 added 0.7% and closed above its prior all-time high set the previous week. The Dow Jones Industrial Average gained 69 points, or 0.1%, while the Nasdaq Composite rose 0.8%. The immediate catalyst was the July producer price index, which showed prices at the U.S. wholesale level up 4.7% from a year earlier. That remains high, but it was down from June's 5.5% pace and slightly better than economists had forecast. It followed a similarly reassuring consumer inflation report released the day before. Together, the data reset the market's policy expectations: traders now assign only a 35% chance to a September federal funds rate hike, down from roughly 50% two days earlier, according to CME Group data.

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The Dow Jones Industrial Average gained 69 points, or 0.1%, while the Nasdaq Composite rose 0.8%.

The easing inflation signals were reinforced by another drop in oil prices. Brent crude fell 2.1% to $87.07 a barrel in its latest yo-yo move. The move matters because energy costs had been one of the main conduits of inflation and inflation expectations after the war with Iran sent oil and gasoline prices surging. The 10-year Treasury yield declined to 4.65% from 4.68% late Wednesday and from 4.72% on Monday. Significantly for market psychology, the yield remains well above the 3.97% level that prevailed before the conflict, indicating that the bond market has not fully normalized even as it moves in the right direction.

For equity investors, a lower term premium and reduced probability of near-term Fed tightening supports valuations, particularly for duration-sensitive growth stocks and rate-sensitive sectors. The record close in the S&P 500 after only a brief pause is another sign of how quickly the market can reprice risk when incoming data tilt dovish. However, the CME-implied 35% probability is not zero. Fed officials are split on whether they should have already begun hiking interest rates, and any increase would be the first in more than three years. A surprise hike could disrupt the rally. The political backdrop adds another layer: President Donald Trump has been lobbying for lower interest rates, and a Fed tightening move could create conflict between the White House and the central bank.