US stock market hits record highs for second day as Fed rate cut bets ignite Dow, S&P 500, Nasdaq rally led by Apple, Nvidia, Tesla

US stock market delivered another emphatic rally this week, with the S&P 500 and Nasdaq closing at record highs and the Dow adding more than 480 points on Tuesday, August 12, as traders doubled down on bets the Federal Reserve will cut interest rates in September.

The catalyst came in the morning’s Consumer Price Index report: headline inflation eased to 2.7% year-over-year in July, a touch below forecasts, while core CPI ticked up to 3.1%, its highest reading since February. That combination — softer headline prices but stubborn underlying inflation — was interpreted by some traders as a “Goldilocks” scenario: enough cooling to justify a rate cut, but not weak enough to suggest the economy is stalling.

“It’s the sweet spot for equity bulls,” said Chris Weston, head of research at Pepperstone, in a note. “The Fed gets cover to cut, and corporate earnings get the benefit of lower borrowing costs.”

• Dow Jones Industrial Average — up 483.62 points (+1.1%) to 45,052.84.
• S&P 500 — gained 57.48 points (+1.1%) to 5,696.21, a new record close.
• Nasdaq Composite — rose 210.14 points (+1.4%) to 15,726.93, also a record high.

Fed cut odds surge toward certainty

Within minutes of the CPI release, futures markets repriced aggressively. CME’s FedWatch tool showed 94% odds of a September rate cut, up from 81% just a day earlier. Traders are also factoring in a second move before year-end — something that seemed far-fetched as recently as July. The Treasury market echoed that sentiment, with the two-year yield — often the most sensitive to Fed expectations — falling to 3.84%, its lowest in four months. “The bond market is telling you this isn’t just a one-and-done,” said Kathy Jones, chief fixed-income strategist at Charles Schwab.

Treasury Secretary calls for bolder action

The rate-cut drumbeat grew even louder on Wednesday, August 13, when U.S. Treasury Secretary Scott Bessent publicly urged the Fed to slash rates by 50 basis points in September, not the 25 basis points most investors currently expect. Speaking at the Economic Club of New York, Bessent argued that tariffs imposed earlier this year have temporarily distorted inflation readings, and that the Fed risks “waiting too long to act decisively.”
Such a high-profile intervention from the Treasury is unusual — and it didn’t go unnoticed on trading floors. “This is a political nudge to the Fed,” said Julia Coronado, president of MacroPolicy Perspectives. “They’ll resist being seen as taking orders, but they can’t ignore the growing pressure.”

• Apple (AAPL) — up 2.3% to $238.71, adding roughly $70 billion in market value.
• Nvidia (NVDA) — climbed 3.8% to $149.22, extending its year-to-date gain to more than 80%.
• Tesla (TSLA) — jumped 4.1% to $322.85, its best single-day performance in over two months.
• Microsoft (MSFT) — rose 1.7% to $468.10, pushing its market cap near $3.6 trillion.
• Amazon (AMZN) — gained 2.0% to $212.44, marking a fresh all-time high.

Stocks ride global wave of optimism

The bullish mood wasn’t confined to New York. Tokyo’s Nikkei, Frankfurt’s DAX, and London’s FTSE all closed higher on Wednesday, with several indexes hitting multi-month peaks. “When the Fed signals an easing cycle, it tends to pull up risk assets worldwide,” noted Paul Donovan, chief economist at UBS Global Wealth Management.

The S&P 500 added 0.4% on Wednesday to set another all-time high, the Dow climbed 364 points, and the Nasdaq gained 0.3%, extending its record run. Tech megacaps — Apple, Nvidia, and Tesla — led the charge, each rising between 2% and 4% over the two-day stretch.

What investors should watch next

For all the euphoria, the Fed’s decision is not a lock. Persistent core inflation, especially in housing and services, could make policymakers wary of moving too quickly. July’s core CPI rise was driven in part by airfares (+6.2% month-on-month) and owners’ equivalent rent (+0.5%), categories that rarely cool quickly.

Market veterans warn that if the Fed signals a smaller or slower cutting cycle, the unwind in bullish positioning could be sharp. “We’ve seen this movie before — in 2019, in 2007,” said Art Hogan, chief market strategist at B. Riley Wealth. “When markets price in perfection, it only takes one hawkish sentence to break the mood.”

The bigger picture

If the Fed follows through with an aggressive rate cut, it could extend the already historic U.S. equity bull run into 2026. Cheaper borrowing costs would benefit rate-sensitive sectors like housing, autos, and small-cap stocks, while also providing a tailwind for emerging markets.

But the move would also signal the Fed’s concern about economic momentum — a reminder that rate cuts often arrive late in the cycle, not at the beginning. “The market wants to believe this is the start of another boom,” said Coronado. “History tells us it’s often the Fed’s way of cushioning a slowdown.”

FAQs:

Q1: Why is Wall Street rallying after the latest U.S. inflation data?
Because traders expect the Fed to cut interest rates in September after July’s CPI showed cooling headline inflation.

Q2: What did Treasury Secretary Scott Bessent say about the September Fed meeting?
He called for a bigger 50-basis-point rate cut instead of the smaller move most expect.