US stocks rise as softer inflation cools Fed hike fears
What's the story
US stocks have witnessed a surge, reversing the September decline in the S&P 500 index. The uptrend comes after inflation data came in lower than expected, strengthening the case against a potential interest rate hike by the Federal Reserve (Fed) in October. Consumer spending also saw an uptick in August, marking its fastest growth in over a year.
Market reaction
Two-year yield declines, money markets assign less Fed hike probability
The yield on two-year notes fell by two basis points to 4.86%, while money markets now assign a less than 40% probability to a Fed hike in October.
The dollar dipped slightly but was still on track for its best month since June.
The Fed's preferred measure of underlying inflation, the personal consumption expenditures price index excluding food and energy, rose by a less-than-expected 0.2% in August.
Economic indicators
Consumer spending rises at fastest pace in over a year
Data also showed consumer spending rose at its fastest pace in over a year, helping to power the economy through persistent inflation.
Chris Zaccarelli at Northlight Asset Management said the mixed nature of the data indicates that the Fed was probably correct in raising rates in September.
He added if inflation data improves, they might be able to skip a meeting or raise rates less than previously feared.
Job market
Hiring picks up in September
Companies increased hiring in September, indicating a possible economic recovery.
The government's employment report due on Friday is expected to show employers added a solid 90,000 jobs last month.
Kenwell said the upcoming jobs report and next month's earnings season should provide more insight into whether this resilience is holding up.