A softer-than-expected inflation reading lifted Wall Street indexes on Wednesday, as investors recalibrated expectations for Federal Reserve policy. The personal consumption expenditures price index rose 3.4% year‑over‑year in August, below the 3.7% forecast compiled by economists polled by Reuters. The data followed a second‑quarter gross domestic product report that showed the U.S. economy expanding at a solid pace, driven by strong consumer spending and business investment tied to artificial‑intelligence infrastructure.

Market participants interpreted the numbers as a sign that the Fed might delay further rate hikes. Sam Stovall, chief investment strategist at CFRA Research, noted that a bullish chart pattern had formed in the broader market, making any positive economic catalyst likely to spur gains. Traders now assign roughly a 35% probability to an October rate increase, down from about 45% a week earlier, according to LSEG data.

The Federal Reserve has faced political pressure from the White House after its first rate hike since 2023, while inflation remains a focal issue for voters ahead of the midterm elections. Despite the upbeat inflation news, major equity indexes closed mixed: the S&P 500 slipped 0.25% and the Dow Jones Industrial Average fell 0.86%, while the Nasdaq edged up 0.24%. The S&P 500 and Nasdaq were on track for a second consecutive quarterly rise if the momentum holds.

The yield on the 10‑year Treasury note steadied at 5.246%, a level reached after touching its highest point since June 2007. Crude oil prices edged higher, with December Brent futures climbing modestly. In the labor market, ADP reported that private employers added 90,000 jobs in September, exceeding expectations and marking an increase from 36,000 in August. The Labor Department is scheduled to release its official September employment figures on Friday, with analysts projecting a gain of 84,000 jobs, down from the 162,000 recorded in the prior month.

Reuters contributed reporting to this article.