By Megan Leonhardt | Wednesday, September 10

Can't Stop the Beat. An unexpected slowdown in wholesale inflation and Oracle's massive AI surprise helped the S&P 500 clinch another record Wednesday.

The S&P ended 0.3% higher, building on its high from Tuesday. The Nasdaq Composite rose 0.03%. The Dow Jones Industrial Average, however, was down 220 points, or 0.5%. The blue-chip index notably doesn't count Oracle as one of its 30 members.

Wholesale inflation unexpectedly slowed in August, with the Producer Price Index edging down 0.1% in August, putting the annual rate at 2.6%.  That comes after July's inflationary surge of 0.7% month over month lifted annual growth to 3.1%. 

Those numbers helped stocks a bit. So did Oracle's big surprise. The software and cloud company said its backlog of work had grown to $455 billion in the latest quarter, up from $138 billion just three months earlier. The data point was the latest sign that AI demand continues to grow. Oracle shares finished the day up 36%. It's the first time on record that a U.S. company with a $500 billion-plus market cap has gained more than 25% in a single trading day.

Investors largely ignored other economic headlines today. 

The Senate Banking Committee advanced Trump's pick for the Federal Reserve's Board of Governors to a full vote from the Senate. Stephen Miran is expected to sail through to full confirmation in time for the Fed meeting next week.

That could set up an awkward meeting, since a federal judge granted Fed Gov. Lisa Cook's bid to block her termination by President Donald Trump pending the resolution of an ongoing court case. Cook's lawyers said that she plans to “continue to carry out her sworn duties” as a governor—presumably that includes participating in the upcoming Federal Open Markets Committee meeting. 

Trump's legal team has said it will appeal the judge's decision to the D.C. Circuit Court of Appeals. 

Meanwhile, the U.S. Labor Department announced Wednesday that it was launching an investigation into the Bureau of Labor Statistics’ collection and reporting of data.

After the firing of Erika McEntarfer, Trump's replacement pick E.J. Antoni hasn't yet been scheduled for a nomination hearing. The Office of Inspector General sent a letter to the acting head of the BLS saying it would review reductions in data collection for the consumer price index and the producer price index, as well as examine the revisions in payroll growth. 

DJIA: -0.48% to 45,490.92
S&P 500: +0.30% to 6,532.04
Nasdaq: +0.03% to 21,886.06

The Hot Stock: Oracle +36.0%
The Biggest Loser:  Synopsys -35.8%

Best Sector: Technology +1.8%
Worst Sector: Consumer Discretionary -1.2%

August Consumer Inflation Could Test Fed

The Federal Reserve is poised to lower interest rates, but Thursday’s data on consumer inflation could help determine the depth and breadth of those cuts -- especially if the pace of inflation continues to accelerate.

Economists will be carefully watching the Consumer Price Index tomorrow to determine whether the surge in services sector price growth in July was a one-off spike or a sign of more persistent pressure.

Service expenditures including airfares, medical care, recreation, and tuition posted big gains in July -- even as goods price growth remained more benign. Services inflation has proven much trickier for the Fed to tame, and July’s upswing definitely caught policymakers’ attention. Chicago Fed President Austan Goolsbee, for example, called it a "dangerous data point."

Consumer inflation is expected to have risen 0.3% month over month in August, translating into an annual gain of 2.9%, according to economists surveyed by FactSet. That’s a sizable uptick from the 0.2% monthly gain in July and the 2.7% gain year over year. 

Expect inflation to remain “sticky” in August, as tariffs continue to trickle through to consumers, writes Stephen Juneau, U.S. economist at Bank of America Securities.

But economists are expecting core inflation, which excludes the more volatile food and energy costs, to remain steadier. Core CPI is seen rising 0.3% month over month, putting the annual gain at 3.1%. That’s the same monthly and annual pace logged in July. 

Even with the gains in headline inflation, the recent spate of labor weakness is expected to push a majority of Fed policymakers to lower the target range by a quarter of a percentage point to 4% to 4.25% at next week’s meeting. 

“The Fed’s next moves will hinge on whether data convinces policymakers that cuts won’t undermine price stability; credibility -- not politics alone -- will determine how far and how fast they can ease,” writes Joe Brusuelas, chief economist at RSM US.

The data will be released at 8:30 a.m. Eastern. Follow along at Barrons.com for all the latest news.