Why Dow Jones hit a record high in trade today?

The Dow Jones Industrial Average surged by over 500 points on Thursday (September 11), reaching a record high as investors shrugged off a higher-than-expected inflation print for August. The consumer price index (CPI) data released today showed that inflation pressures remain persistent but manageable, increasing hopes that the Federal Reserve will proceed with its planned rate cuts at next week’s policy meeting.

August’s headline CPI rose 0.4% month-on-month, slightly above expectations of 0.3% and clocked in at 2.9% year-on-year, in line with forecasts. Core CPI, which strips out volatile food and energy prices, came in at 0.3% month-on-month and 3.1% year-on-year, matching economists’ expectations. The results suggest inflation remains sticky but without alarming acceleration.

Madhavi Arora, Chief Economist at Emkay Global Financial Services, noted that “the August CPI was largely in line, removing a key risk for the markets ahead of next week’s FOMC meeting.” She added, “While this print shows that inflation is unlikely to get better soon, the sharp weakening in labour market dynamics means that a 25bps cut next week is now certain, with the market now pricing 3 cuts in total in 2025.”

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The report also showed signs of tariff pass-through into prices. Core goods inflation rose to 0.3% month-on-month, led by apparel, used cars, and certain recreational goods. Meanwhile, core services inflation softened, with super core services excluding shelter dipping to 0.3% from 0.4% previously. Despite this, rising airfares and lodging costs kept upward pressure on prices.

Market reaction was immediate but measured. S&P 500 futures rose 0.2%, while yields on 2 and 10-year U.S. Treasuries fell by 3 basis points and 1 basis point, respectively. The dollar index dropped 0.1%. With expectations of nearly three Fed rate cuts in 2025, the probability of a cut at the September meeting has remained at 91%.

Arora explained, “August’s CPI data confirms that while inflation may not be getting worse, it is not getting a lot better either—but with the labor market where it is (and tariffs not yet showing up decisively in the data), the Fed is now almost certain to turn towards the employment side of its dual mandate and restart its easing cycle next week.”

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