S&P 500 hits record close as rate-hike worries ease

The S&P 500 closed at a record high on Thursday, 13 August 2026, as investors grew more confident that the Federal Reserve would pause its tightening cycle following softer-than-expected inflation data. The benchmark index climbed 0.65% to 7,798.99 points, surpassing its previous record high set the prior week. The Nasdaq Composite gained 0.81% to 26,803.03, while the Dow Jones Industrial Average edged up 0.13% to 53,839.99, reflecting broad-based optimism across U.S. markets.

The rally was driven by a combination of factors, including strong performance from technology stocks and reduced concerns about further interest rate hikes. Memory chip makers Sandisk and Micron Technology led the charge, surging 13.7% and 4.2% respectively, while Microsoft added almost 1% and Meta Platforms rose 2.8%. These gains were fueled by continued demand for artificial intelligence infrastructure, with companies like CoreWeave and Cerebras reporting robust growth despite mixed investor reactions. However, Cisco Systems fell 8.4% after its revenue forecast failed to meet elevated expectations, highlighting ongoing volatility in the tech sector.

Inflation data released earlier in the week provided a key catalyst for the market’s optimism. Producer prices in July remained unchanged month over month, with annual growth slowing to 4.7% from 4.9%, below economists’ forecasts. Core producer prices, which exclude food and energy, rose 4.2% annually and 0.2% monthly, both in line with expectations. This followed a similar slowdown in consumer prices, reinforcing perceptions that inflationary pressures were easing. Traders now price in a 63% chance the Fed will keep rates unchanged at its 20 September meeting, according to CME’s FedWatch tool.

Investor sentiment was further bolstered by strong corporate earnings and forecasts. Microsoft and Amazon’s upbeat guidance reduced worries about excessive spending on AI data centers, while Netflix surged 5.4% after billionaire investor Bill Ackman revealed a major stake in the company. Conversely, Tapestry, the parent company of Coach, plummeted more than 16% after forecasting muted revenue growth. Meanwhile, Dell Technologies and HP rose after Lenovo’s quarterly results from China exceeded expectations.

The Federal Reserve’s policy outlook remained a focal point, with analysts divided on whether the central bank would deliver a rate hike before year-end. While cooling inflation data eased immediate concerns, some market participants cautioned that the Fed’s internal debates over monetary policy were far from resolved. “The AI earnings-driven tech boom continues,” said Jay Hatfield, CEO of Infrastructure Capital Advisors, “It’s an earnings boom, not a bubble.”

Geopolitical tensions and energy markets also influenced investor behavior. Oil prices fell 2% as President Donald Trump’s administration asserted control over the Strait of Hormuz, despite private data suggesting shipping traffic remained constrained. The U.S. and Iran remained locked in a standoff over ending the Iran war, adding another layer of uncertainty to global markets. Recent developments include the U.S. receiving several warnings from Israel over the past year that Iran intended to assassinate President Donald Trump, including before a secret Air Force One ruse in Turkey, according to a current U.S. official and two former officials. U.S. intelligence officials could not independently verify these claims.

The S&P 500’s 14% year-to-date gain and the Nasdaq’s 15% rise underscored the market’s resilience despite lingering macroeconomic headwinds. However, traders remained cautious, with light trading volumes of 16.1 billion shares—below the 20-day average of 17.5 billion—reflecting a mix of optimism and uncertainty. The index posted 30 new highs and one new low, while the Nasdaq recorded 155 new highs and 85 new lows, highlighting divergent performance across sectors.

As the market looks ahead, attention will shift to corporate earnings reports and potential Fed commentary. Applied Materials, a key player in chipmaking equipment, is set to release results after the market close, with investors watching for signals on demand for AI infrastructure. Meanwhile, the broader question of whether the Fed will maintain its pause on rate hikes or resume tightening looms large, shaping the trajectory of equities in the months to come.