Wall Street rises on Wednesday: U.S. GDP revised up to 2.2%, inflation eases — markets expect a Fed pause in October

U.S. stock markets rose on Wednesday, as new data showed that the American economy grew faster than expected in the second quarter, while inflation held steady — signals that increased investors’ bets that the Federal Reserve will not raise interest rates at its October meeting.

The U.S. Department of Commerce revised its estimate for the second-quarter economy upward, taking growth to 2.2% at an annual rate, from the initial estimate of 1.5%, as The Wall Street Journal reports — evidence of the resilience of the world’s largest economy in the face of turmoil from the war in the Middle East and global uncertainties.

The Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) price index, rose at an annual rate of 3.4% in August, unchanged from the revised July figure. Meanwhile, the core index, which excludes food and energy, climbed by 3.0% — slightly below economists’ expectations — according to the same reporting, giving the Fed room not to rush monetary tightening.

Encouraging news also came from the jobs front: ADP data showed the private sector added 90,000 jobs in September, above the forecast of 70,000 — a marked recovery after a weak August, keeping the unemployment rate low and strengthening consumption.

Markets reacted without delay: the Nasdaq index climbed by around 0.8%, the S&P 500 gained around 0.4%, while the Dow Jones moved into positive territory. Investors’ bets on a new rate hike at the Fed’s October meeting fell sharply — the probability dropped to around 35%, from 71% a week earlier — after the soft message from New York Fed President John Williams that there is no “urgency” for further tightening.

The yield on 10-year U.S. Treasury bonds stood near 5.24%, after closing the previous day at its highest level since 2002. Meanwhile, Boeing won a multi-billion-dollar contract with the U.S. Navy to build fighter jets.