US stocks rally to records on hopes for cuts to interest rates
[August 13, 2025] By
STAN CHOE
NEW YORK (AP) — The U.S. stock market rallied to records on Tuesday
after data suggested inflation across the country was a touch better
last month than economists expected.
The S&P 500 rose 1.1% to top its all-time high set two weeks ago. The
Dow Jones Industrial Average climbed 483 points, or 1.1%, and the Nasdaq
composite jumped 1.4% to set its own record.
Stocks got a lift from hopes that the better-than-expected inflation
report will give the Federal Reserve leeway to cut interest rates at its
next meeting in September.
Lower rates would give a boost to investment prices and to the economy
by making it cheaper for U.S. households and businesses to borrow to buy
houses, cars or equipment. President Donald Trump has angrily been
calling for cuts to help the economy, often insulting the Fed’s chair
personally while doing so.
But the Fed has been hesitant because of the possibility that Trump’s
tariffs could make inflation much worse. Lowering rates would give
inflation more fuel, potentially adding oxygen to a growing fire. That’s
why Fed officials have said they wanted to see more data come in about
inflation before moving.
Tuesday’s report said U.S. consumers paid prices for groceries, gasoline
and other costs of living that were overall 2.7% higher in July than a
year earlier. That’s the same inflation rate as June’s, and it was below
the 2.8% that economists expected.
The report pushed traders on Wall Street to increase bets that the Fed
will cut interest rates for the first time this year in September.
They’re betting on a 94% chance of that, up from nearly 86% a day
earlier, according to data from CME Group.
The Fed will receive one more report on inflation, as well as one more
on the U.S. job market, before its next meeting, which ends Sept. 17.
The most recent jobs report was a stunner, coming in much weaker than
economists expected.
Some economists warn that more twists and turns in upcoming data could
make the Fed’s upcoming decisions not so easy. Its twin goals are to get
inflation to 2% while keeping the job market healthy. Helping one with
interest rates, though, often means hurting the other.
Even Tuesday’s better-than-expected inflation report had some
discouraging undertones. An underlying measure of inflation, which
economists say does a better job of predicting where inflation may be
heading, hit its highest point since early this year, noted Gary
Schlossberg, market strategist at Wells Fargo Investment Institute. That
helped cause some up-and-down swings for Treasury yields in the bond
market.
“Eventually, tariffs can show up in varying degrees in consumer prices,
but these one-off price increases don’t happen all at once,” said Brian
Jacobsen, chief economist at Annex Wealth Management. “That will
confound the Fed and economic commentators for months to come.”
Other central banks around the world have been lowering interest rates,
and Australia’s on Tuesday cut for the third time this year.
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Specialist James Denaro works on the floor at the New York Stock
Exchange in New York, Wednesday, July 30, 2025. (AP Photo/Seth Wenig)
 On Wall Street, Intel’s stock rose
5.6% after Trump said its CEO has an “amazing story,” less than a
week after he had demanded Lip-Bu Tan’s resignation.
Circle Internet Group, the company behind the popular USDC
cryptocurrency that tracks the U.S. dollar, climbed 1.3% despite
reporting a larger loss for the latest quarter than analysts
expected. It said its total revenue and reserve income grew 53% in
its first quarter as a publicly traded company, which topped
forecasts.
On the losing side of Wall Street was Celanese, which sank 13.1%
even though the chemical company delivered a better profit than
expected. It said that customers in most of its markets continue to
be challenged, and CEO Scott Richardson said that “the demand
environment does not seem to be improving.”
Cardinal Health dropped 7.2% despite likewise reporting a stronger
profit for the latest quarter than analysts expected. Its revenue
fell short of forecasts, and analysts said the market’s expectations
were particularly high for the company after its stock had already
soared 33.3% for the year coming into the day.
Critics say the broad U.S. stock market is looking expensive after
its surge from a bottom in April. That’s putting pressure on
companies to deliver continued growth in profit.
All told, the S&P 500 rose 72.31 points to 6,445.76. The Dow Jones
Industrial Average climbed 483.52 to 44,458.61, and the Nasdaq
composite jumped 296.50 to 21,681.90.
In stock markets abroad, indexes edged up in China after Trump
signed an executive order late Monday that delayed hefty tariffs on
the world’s second-largest economy by 90 days. The move was widely
expected, and the hope is that it will clear the way for a possible
deal to avert a dangerous trade war between the United States and
China.
Japan’s Nikkei 225 jumped 2.1%, and South Korea’s Kospi fell 0.5%
for two of the world’s bigger moves.
In the bond market, the yield on the 10-year Treasury rose to 4.28%
from 4.27% late Monday.
The yield on the two-year Treasury, which more closely tracks
expectations for the Fed, fell to 3.73% from 3.76%.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
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