U.S. stocks climbed on Friday after August inflation data came in hot, pushing expectations for a Federal Reserve rate hike next week close to certainty. The Dow Jones Industrial Average gained about 506 points, or 1%, while the S\u0026P 500 rose 1% and the Nasdaq Composite advanced 1.2%. All three indexes ended a four-day losing streak.

The rally followed the latest Consumer Price Index report, which showed overall prices increased 0.4% in August from the previous month and 3.4% from a year earlier. Both readings matched economists’ forecasts, although they were slightly higher than July’s figures.

Why Stocks Rose After Hot Inflation Data

The market’s reaction may appear unusual because hotter inflation typically increases pressure on the Federal Reserve to raise interest rates. In this case, analysts said the data reduced uncertainty about the central bank’s next move.

David Wagner, head of equities at Aptus Capital Advisors, said the report removed a major unknown for investors. “It now feels like a well-signaled September hike,” he said.

Wagner added that a rate increase could be interpreted as evidence that the Fed is responding to inflation before price pressures become more difficult to control. That could reduce uncertainty around inflation and lower the risk of a much larger tightening cycle later.

The market response therefore reflected greater clarity about monetary policy rather than enthusiasm for higher interest rates. With the policy path appearing clearer, stocks found room to rise.

BREAKING: The odds of a September interest rate hike surge to 79% after US CPI inflation hits 3.4% in August. It is incredible to think that, at the start of 2026, markets were expecting the Fed’s 3rd interest rate CUT of the year this month. Inflation roars on and "higher for… pic.twitter.com/397cPkrWm2 — The Kobeissi Letter (@KobeissiLetter) September 11, 2026

Markets are now pricing in an 87% chance that the Fed will raise rates by 25 basis points at next week’s Federal Open Market Committee meeting. That probability increased from 72% one day earlier and 50% one week earlier, according to the CME FedWatch tool.

Oil Prices Add to Inflation Pressure

Rising oil prices have added to inflation concerns in recent weeks. Brent crude topped $108 per barrel before retreating on Friday, while diesel prices reached a record $6 per gallon. Higher energy costs can feed into broader consumer prices over time.

Although inflation has trended lower since May, it remains well above the Federal Reserve’s 2% target. The rise in oil prices has complicated the inflation outlook as policymakers prepare for next week’s decision.

Friday’s CPI report was the last major inflation reading scheduled before Fed officials meet next week. Investors will also watch the Fed’s decision and accompanying communications for how officials describe inflation and the path of monetary policy.

Oracle shares also contributed to the positive session. The database software company’s stock rose more than 2% after Oracle reported strong cloud computing growth in its latest earnings report. The shares later gave up part of their gains but remained in positive territory.

The gains across the major indexes came as traders assessed what the inflation data could mean for monetary policy in the weeks ahead.

Source: CoinCentral