Dow Jones Industrial Average extends gains on renewed Fed rate cut hopes

• The Dow Jones rose again on Wednesday as equities look higher.
• Investors have beaten back recession fears following a slump in labor data last week.
• Rate markets now see better-than-even odds of three straight rate cuts by the end of the year.

The Dow Jones Industrial Average (DJIA) rose on Wednesday as investors pushed equities into a second straight day of decisive gains. Interest rate cut expectations have been pinned higher, bolstering broad-market sentiment as traders broadly expect up to three interest rate cuts through the year's end.

The Dow Jones was pushed firmly above the 44,500 level, and is back on track to challenge the 45,000 major handle once again. Price action is still on the low side of record highs above 45,130, with bullish momentum getting pushed higher by technical support from the 50-day Exponential Moving Average (EMA) near 43,780.

Fed rate cut hopes climb higher

Despite a general uptick in core inflation figures this week, investors are brushing off rising price pressures as hopes for an accelerated pace of Fed rate cuts return to the forefront of traders' attention. According to the CME's FedWatch Tool, rate markets are pricing in 99.95% certainty that the Fed will be delivering at least a quarter-point interest rate cut on September 17, with 1-in-3 odds of a double-cut. Overall, rate traders are expecting slightly better-than-even odds that the Fed will deliver a third 25 bps rate trim by mid-December.

Investors will be looking ahead to Thursday's Producer Price Index (PPI) inflation print, which is unlikely to derail Fed rate cut hopes. US PPI inflation specifically excludes any items that would immediately be impacted by tariff price changes, limiting the potential for lopsided trade policies to directly impact business-level inflation. Still, median market forecasts expect an uptick in core PPI inflation to 2.9% YoY in July, up from 2.6% for the previous period.

Dow Jones 5-minute chart

Dow Jones daily chart