The Dow Jones Industrial Average (DJIA) surged to a record intraday high above 47,300 on Friday, driven by cooler-than-expected US inflation data that reinforced market expectations for Federal Reserve rate cuts later this year. The index’s milestone came as investors piled into risk assets, interpreting the softer Consumer Price Index (CPI) print as a green light for a more dovish policy path.
Headline CPI rose 3.0% year-over-year in September, slightly below the expected 3.1% and down from August’s 2.9%. The data boosted confidence that inflation pressures are easing, even as price growth remains above the Fed’s 2% target. Markets now anticipate that the central bank will deliver two 25-basis-point rate cuts before year-end.
Rate cut bets climb as inflation cools
According to the CME FedWatch Tool, traders now assign over a 95% probability of consecutive rate cuts in October and December. The expected timing of the first 2026 rate cut has also been moved forward to March from April, underscoring growing conviction that the Fed’s tightening cycle is over.
Meanwhile, September’s Purchasing Managers Index (PMI) data surprised to the upside, with the services PMI rising to 55.2 versus forecasts of 53.5, highlighting resilience in business activity. However, the consumer outlook remains fragile: the University of Michigan’s Consumer Sentiment Index slipped to 53.6 from 55.0, and five-year inflation expectations edged up to 3.9% from 3.7%, suggesting households remain cautious despite moderating price pressures.
