U.S. stocks rallied Friday after the release of August inflation data increased expectations for a Federal Reserve interest-rate hike at next week’s meeting. The Dow Jones Industrial Average gained approximately 506 points, or 1%, while the S&P 500 rose 1% and the Nasdaq Composite advanced 1.2%. The three major benchmarks each ended a four-session losing streak.

The move followed Consumer Price Index data showing that consumer prices increased 0.4% month over month and 3.4% from a year earlier. Both readings matched analyst expectations, although they were slightly higher than July’s figures. The report was the final major inflation reading scheduled before Federal Reserve officials meet next week, leaving the central bank to weigh inflation that remains above its 2% objective alongside rising energy costs.

Market rally follows clearer policy outlook

The positive response to inflation data that remained elevated may appear counterintuitive. However, market participants focused on the reduced uncertainty surrounding the Federal Reserve’s next decision.

David Wagner, head of equities at Aptus Capital Advisors, said the report removed significant ambiguity from the policy outlook. “It now feels like a well-signaled September hike,” Wagner noted.

Wagner said a rate increase could demonstrate that the Federal Reserve is responding proactively to inflation pressures. That could reduce uncertainty about inflation and potentially limit the need for a more aggressive tightening campaign in the months ahead. In this view, investors were more concerned about an unclear policy path than about the prospect of a rate increase itself.

The Kobeissi Letter reported on X that the odds of a September interest-rate hike had risen to 79% after U.S. CPI inflation reached 3.4% in August. The post also noted that, at the beginning of 2026, markets had expected the Federal Reserve’s third interest-rate cut of the year to take place this month.

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

Financial markets were assigning an 87% probability to a 25-basis-point increase at the upcoming Federal Open Market Committee meeting, according to CME FedWatch data. That compared with 72% on the previous day and 50% one week earlier. The meeting and subsequent policy guidance will provide the next major reference point for markets assessing the path of interest rates.

Energy prices add to inflation concerns

Rising crude oil prices have added to inflation concerns in recent weeks. Brent crude rose above $108 per barrel before retreating modestly on Friday, while diesel fuel reached a record $6 per gallon. Large increases in energy costs can feed into broader consumer-price categories over time.

Although inflation has eased from its May peak, it remains substantially above the Federal Reserve’s 2% objective. The increase in petroleum prices adds another complication for policymakers as they prepare to determine the central bank’s next interest-rate decision.

Oracle shares rise on cloud performance

Oracle shares gained more than 2% on Friday after the enterprise software company reported strong cloud infrastructure growth in its latest quarterly results. The stock gave back part of its advance during afternoon trading but remained higher.

The broad-based gains in the major U.S. indexes came as investors assessed how the August inflation report could affect monetary policy. The report was published by Blockonomi.