S&P 500 ends higher as strong inflation data cements rate-hike bets

The S&P 500 closed higher on Friday, buoyed by a drop in oil prices and robust consumer price data, which bolstered predictions that the US Federal Reserve would hike interest rates next week to combat inflation. Tech giants Dell and Hewlett Packard Enterprise, along with HP, experienced significant gains, soaring 12%, 12%, and 8.4% respectively, following positive quarterly results.

Oracle, however, saw a slight dip of 1.8%. The probability of a rate hike at the upcoming Fed policy meeting jumped to nearly 90%, down from 72% the previous day. Analyst Thomas Martin of GLOBALT Investments expressed confidence in the Fed's decision to raise rates, stating it would help control inflation. The S&P 500 gained 0.86%, closing at 7,656.98 points, while the Nasdaq rose 0.96% to 26,333.04 points.

The Dow Jones Industrial Average also increased by 0.98% to 52,573.29 points. Nine out of the 11 S&P 500 sector indexes gained, led by communication services and consumer discretionary. Trading volume was relatively light, with 14.0 billion shares exchanged, compared to an average of 14.9 billion over the past 20 sessions. The CBOE Volatility Index, a measure of market fear, fell to 15.88.

This rally came after recent market uncertainty over inflation and long-term Treasury yields, as well as concerns regarding AI data center construction expenses. The S&P 500 is currently down about 2% from its record-high close on August 13 and remains up 12% for the year. Despite its recent decline, the S&P 500 is trading at a 19 times expected earnings ratio, its lowest since April 2025, a period when US President Donald Trump's stringent tariff announcements caused global markets turmoil.

Oil prices dipped but remained around 9% higher for the week due to threats in Middle East shipping lanes, causing supply disruption worries. Brent crude futures fell almost 3% but stayed above $104 a barrel. Advances outnumbered declines in the S&P 500 by a 2.1-to-1 ratio, with eight new highs and nine new lows recorded, while the Nasdaq achieved 45 new highs and 182 new lows.