S&P 500, Nasdaq advance as soft inflation tempers Fed rate-hike bets

On Wednesday, the Nasdaq surged over 1 percent, propelling gains across Wall Street's major indices, driven by a surprisingly mild inflation reading. This positive news indicated a reduced likelihood of the Federal Reserve raising interest rates in the immediate future. According to a report from the Commerce Department, the Personal Consumption Expenditures (PCE) price index for August came in at 3.4 percent on an annual basis, lower than the 3.7 percent projected by economists surveyed by Reuters.

The U.S. economy's performance in the second quarter was also robust, further bolstering the case for a more measured approach to rate hikes by the Fed. Steve Wyett, chief investment strategist at BOK Financial, pointed out that the PCE report was under close scrutiny as market participants sought to gauge the appropriate level of aggression for future rate increases.

Traders' expectations have shifted, with the probability of an October rate hike now at around 38 percent, down from a more than 50 percent chance just a day earlier, as per the CME FedWatch Tool. Additionally, Barclays analysts highlighted that recent adjustments in calculating PCE by the Bureau of Economic Analysis may have also contributed to the lower inflation figure.

Across the board, major and growth stocks experienced positive movement, with many megacap equities enjoying an upward tick.