Wall Street had a good day, and for once the reason was refreshingly simple: prices aren’t rising as fast as everyone feared.
US equities climbed on August 13 after the Bureau of Labor Statistics reported that July’s Producer Price Index came in softer than expected. The S&P 500 rose roughly 0.5% to 0.7%, touching an intraday record near 7,817, while the Nasdaq Composite outperformed with gains of approximately 0.8% to 1.0%. Technology and communication services led the charge.
The inflation picture is finally cooperating
The July PPI reading was flat month-over-month and up 4.7% year-over-year. Economists had penciled in a 4.9% annual increase, and June’s reading had come in at a considerably hotter 5.5%.
The PPI data landed one day after the July Consumer Price Index told a similar story. The CPI registered a 3.4% yearly increase, while core inflation, which strips out food and energy, settled at 2.5%, ticking down from 2.6% the prior month.
For traders, the takeaway was immediate: the Federal Reserve is almost certainly going to sit on its hands at the September 15-16 FOMC meeting. The CME FedWatch Tool reflected the shift, with increased bets on no rate change following the data release.
Where rates stand and why it matters
The federal funds target range currently sits at 3.50% to 3.75%, where it’s been since the July 28-29 FOMC meeting. That decision wasn’t unanimous. The committee voted 9-3 to hold rates steady, meaning three members wanted to move in a different direction.
The Federal Reserve has maintained rates within this range since December 2025, as officials grapple with inflation rates that have consistently exceeded the 2% target for over five years. A vocal minority within the FOMC has advocated for a rate hike to counteract sustained inflation, but recent economic indicators, particularly a weaker-than-expected jobs report, have tempered immediate expectations for such actions.
Tech leads, but the mood is broader than one sector
Technology and communication services stocks were the clear winners of the session. The technology sector, particularly companies linked to AI, has displayed heightened sensitivity to changes in rate outlooks, often driving market leadership when easing inflation concerns suggest that borrowing costs may not rise significantly.
Still, some traders remain wary. Even with the September hold looking increasingly likely, a few market participants are keeping one eye on the possibility of a rate increase later in 2026, given that year-over-year PPI at 4.7% and CPI at 3.4% remain above the Fed’s long-run 2% target.