• The Dow Jones gained solid footing on Friday, bolstered by fresh hopes for Fed rate cuts.
• US CPI inflation rose less than expected in September, stoking market sentiment.
• Investors have further priced in a firm two rate cuts from the Fed this year.

The Dow Jones Industrial Average (DJIA) lumbered into record highs on Friday, posting intraday bids north of 47,300 for the first time ever. Investor sentiment hit high gear after US Consumer Price Index (CPI) inflation came in below expectations, keeping hopes for further interest rates from the Federal Reserve (Fed) pinned to the ceiling.

Headline CPI inflation came in at 3.0% YoY in September, clocking in just below the expected hold at 3.1% and sending investors scrambling to pick up risk assets on expectations that the Fed is now locked into two quarter-point interest rate cuts by the end of the year. US CPI metrics broadly came in below expectations, and markets are brushing off the fact that most inflation readings continue to run well above the Fed’s 2% mandate.

Rate cut bets continue to climb on not-hot inflation data

According to the CME’s FedWatch Tool, rate market bets of back-to-back interest rate cuts in October and December are over 95%. Rate traders have also pulled forward the date for the first interest rate cut in 2026 up to March from April. 

September’s Purchasing Managers Index (PMI) survey results also surprised markets to the upside, with the Services component rising to 55.2 versus the expected 53.5. However, despite the upswing in business confidence, consumers remain notably more downbeat, with the University of Michigan Consumer Sentiment Index declining to 53.6 from 55.0. UoM Consumer 5-year Inflation Expectations also rose again, climbing to 3.9% from 3.7%.

Dow Jones daily chart