US stocks pushed higher on Wednesday as Wall Street grew increasingly confident that the Federal Reserve will cut interest rates at its next meeting, with traders seizing on fresh inflation data as evidence that the central bank could shift toward a looser policy stance.
The Dow Jones Industrial Average was the standout performer in early trading, climbing close to 1%, while the S&P 500 added 0.4% and the Nasdaq Composite, after paring earlier gains, was still up roughly 0.3%.
The upbeat tone followed a strong rally the previous day, sparked by the July Consumer Price Index report. While the data showed inflation picked up, the increase was smaller than many economists had anticipated. That surprise nudged market sentiment firmly toward the belief that a September rate cut is all but certain. According to CME Group data, futures traders were pricing in nearly a 100% probability of a cut.
The inflation report also comes at a time when economic indicators suggest the labor market is losing some steam, a factor likely to add to the Fed’s case for easing.
Markets are also looking ahead to more economic signals in the coming days. The Producer Price Index, a measure of wholesale inflation, is due Thursday, followed by retail sales data on Friday. Both reports will be closely watched for signs of consumer and business resilience, and for confirmation that price pressures are continuing to moderate.
In the corporate arena, several high-profile names made news. Circle, the stablecoin issuer that recently went public, saw its stock fall after announcing plans to sell 10 million shares. Cava shares tumbled after the fast-casual restaurant chain cut its full-year sales growth target, disappointing investors who had been banking on rapid expansion. CoreWeave, a cloud computing firm specializing in AI infrastructure, also opened lower as its cost of debt rose sharply, overshadowing better-than-expected revenue. Cisco is set to release its earnings after the closing bell, and analysts will be looking for signs of how the networking giant is navigating a competitive technology market.
Meanwhile, cryptocurrency exchange Bullish officially priced its IPO at $37 per share, valuing the company at just over $5 billion. That price was higher than earlier projections, signaling strong demand despite the crypto market’s volatility. Bullish had once tried to go public via a SPAC in 2021 at a $9 billion valuation, but that effort collapsed amid regulatory concerns.
Bond markets were also in focus after Treasury Secretary Scott Bessent publicly urged the Fed to cut rates by a full 150 basis points, an unusually aggressive recommendation that added political weight to the case for easing. Treasury yields responded, with the 10-year note yield slipping to 4.25% and the 30-year yield dropping to 4.84%.
Globally, optimism was also lifting some overseas markets. In China, stocks extended their recent rally, supported by strong domestic liquidity and optimism over improved trade relations with the US. Tencent jumped after reporting revenue growth above expectations, while Alibaba, JD.com, Baidu, and PDD Holdings all notched gains. The strength was partly driven by relief that US restrictions on advanced chips from Nvidia and AMD were becoming clearer, giving Chinese tech companies more certainty in planning their operations.
Japan’s Nikkei 225 index hit an all-time high, buoyed by a stronger tech sector and tentative optimism that trade tensions between Tokyo and Washington were being resolved in a way that could benefit Japan’s vital auto industry.
Volatility indicators also reflected growing investor confidence. The VIX, Wall Street’s closely watched “fear gauge,” fell to 14.49, its lowest level since December 2024. This sharp decline comes despite ongoing geopolitical tensions and lingering concerns over tariffs. Analysts say part of the calm is due to high levels of cash sitting on the sidelines, which investors are deploying quickly during market dips. Another factor is what some strategists call the “TACO” effect—short for “Trump Always Chickens Out”—a belief that while President Trump may threaten steep tariffs or other market-disruptive measures, he often pulls back from the harshest moves. That perception has encouraged investors to buy rather than retreat at the first sign of trouble.
Still, beneath the surface of the broad market optimism, there were pockets of weakness. CoreWeave’s disappointing guidance underscored the risks of rapid expansion in capital-intensive industries, especially when debt loads rise faster than operating income. The company’s capital expenditures surged by $1 billion from the previous quarter and could climb another $500 million, while interest expenses are already projected to exceed operating income in the coming months. Some analysts believe CoreWeave may need to take on as much as $10 billion in additional debt this year to meet its growth commitments.
Cava’s sharp selloff also served as a reminder that richly valued growth stocks can suffer swift reversals when they fail to deliver. With same-store sales up just 2.1% and guidance cut, investors questioned whether the chain can sustain its momentum in a slowing economy. Competition in the fast-casual space remains fierce, with brands like Chipotle and Starbucks signaling similar headwinds in recent earnings calls.
In the background, the crypto sector continued to make headlines. Beyond Bullish’s IPO, stablecoin issuer Circle reported stronger-than-expected quarterly revenue, Ethereum-focused Bitmine announced plans to raise $20 billion to expand its holdings, and several alternative cryptocurrencies posted significant gains. Analysts noted that the supportive regulatory posture of the Trump administration has played a role in reviving enthusiasm for digital assets, with institutional investors showing greater willingness to gain exposure.
Overall, Wednesday’s session was shaped by a mix of macroeconomic optimism, sector-specific developments, and global market currents. The belief that the Federal Reserve is on the cusp of cutting rates has energized investors who see monetary easing as a catalyst for continued gains, particularly with major indexes already at or near record highs. Yet corporate earnings results and sector outlooks are reminding traders that not all companies will benefit equally, and that underlying fundamentals still matter in a market where sentiment can turn quickly.
For now, the interplay between easing inflation, central bank policy shifts, and company-specific narratives is likely to dominate the investment landscape. The next few days of economic releases could either reinforce the case for the Fed to act or introduce new uncertainty. Until then, the rally continues, even as experienced investors keep an eye on the risks that come with crowded optimism.