Both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) closed higher on Wednesday as investors reacted positively to Consumer Price Index (CPI) data.

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News That Moved the Stock Market Today

• The Consumer Price Index (CPI) rose 3.4% year-over-year in July, in line with expectations and down from 3.5% in June.
• Furthermore, core CPI, which strips out volatile food and energy items, increased by 2.5%, matching the consensus estimate and down from 2.6% in the prior month.
• Rate hike expectations dropped following the data. On the CME FedWatch tool, the odds of a 25-bp rate hike at the September 16 Federal Open Market Committee (FOMC) meeting fell to 38.1% from 48.4% a day ago. In addition, the odds of at least one rate hike by year-end decreased to 72.5% from 78.8%.
• Elsewhere, former National Economic Council Director Larry Kudlow said President Trump is considering lowering the capital gains tax ahead of November's midterm elections. The reduction would allow investors to index capital gains to inflation. If implemented, investors would only be taxed on equity gains after their original cost basis is adjusted for inflation.
• SpaceX (SPCX) soared after CEO Elon Musk held an all-hands meeting, sharing that Starlink had over 22 million subscribers and forecasting AI-based internet traffic to be 1,000x human traffic in five years.
• Alphabet (GOOGL) debuted its Pixel 11, 11 Pro, 11 Pro XL, and 11 Pro Fold phone models. The new phones start at $899, while the 11 Pro Fold will sell for $1,899.
• Software stocks continued to trend lower, with ServiceNow (NOW), Microsoft (MSFT), and Adobe (ADBE) closing in the red.