Stock Market Indexes Rally on Inflation Data, Though the Dow Sat It Out

The S&P 500 climbed 0.6% and the Nasdaq Composite gained 1.1% following August's core PCE print of 0.2%, well below the 3.3% consensus forecast. The cooler inflation reading pushed market expectations for the next Federal Reserve rate hike from October to December, giving equities room to run.

The rally's breadth was notably thin. Six mega-cap technology stocks drove nearly all the S&P 500's advance, while the Dow Jones Industrial Average closed flat. Among Dow components, CAT and GS both declined, weighing on the index even as tech-heavy benchmarks surged.

The sharp divergence between the Nasdaq's 1.1% gain and the Dow's flat finish underscores a familiar pattern: rate-sensitive growth stocks respond immediately to dovish inflation surprises, while industrials and financials lag. The delayed rate-hike timeline favors long-duration tech names but offers less obvious relief to earnings-sensitive cyclicals.