CPI Slips to 3.5%, Stocks Rise on Rate-Cut Hopes

Headline inflation eased to 3.5% in the latest consumer price index reading, the Bureau of Labor Statistics reported Friday. Equities moved higher on the data, with the SPDR S&P 500 ETF gaining 0.7%. The print came in slightly below the 3.6% consensus, adding weight to expectations the Federal Reserve will cut interest rates before year-end.

Core inflation held at 3.8%, signaling that underlying price pressures remain sticky. Traders said the mixed report kept the September meeting in play. Any rate move would depend on subsequent data, they added.

The report lands as markets also digest a busy earnings calendar and escalating tensions in the Middle East. The combination of a softer headline number and persistent core inflation leaves the Fed in a cautious stance. The next major data point is the producer price index due next week.