U.S. Stocks Advance Toward Record Highs As Oil Retreats And Inflation Moderates

Idaho News · National
August 13, 2026 at 11:32 AM PDT

Why It Matters

Cooling inflation and falling energy prices are lifting U.S. equity markets toward record territory, signaling potential relief for American households and investors alike. The combination of softer wholesale price growth and retreating crude oil costs is reshaping expectations for Federal Reserve policy decisions in the months ahead, with significant implications for borrowing costs and economic growth.

What Happened

U.S. stocks moved closer to all-time highs on Thursday as investors digested positive inflation data and declining energy prices. The S&P 500 climbed 0.5%, putting it on track to eclipse the record high set the previous week. The Nasdaq composite gained 0.7%, while the Dow Jones Industrial Average edged down 47 points, a 0.1% decline.

Wholesale inflation in July came in at 4.7% above year-earlier levels, a meaningful drop from June’s 5.5% rate and better than what economists had anticipated. The improvement suggested price pressures in the broader economy may be easing, which could allow the Federal Reserve to hold off on raising interest rates if the downtrend continues.

Oil markets contributed to the market rally, with Brent crude falling 1.5% to $87.67 per barrel. Crude had swung wildly over the past month, ranging from $72 to $102 per barrel, but the recent pullback suggests some stabilization in energy costs that have weighed on consumer and business spending.

Treasury yields declined across the board, with the 10-year yield dropping to 4.64% from 4.68% late Wednesday and 4.72% on Monday. The yield remains elevated compared to pre-conflict levels of 3.97%, reflecting ongoing geopolitical tensions.

Market Movers

Real estate and building-related stocks gained ground on the moderating inflation outlook. AvalonBay Communities rose 2%, while Builders FirstSource added 2.1%. Fossil Group climbed 4.6% as investors repositioned toward consumer discretionary and economically sensitive holdings. Cisco Systems bucked the trend, falling 9% amid broader technology sector volatility.

International markets also responded positively to the inflation relief. South Korea’s Kospi index jumped 3.6%, reflecting broader appetite for risk assets as rate-hike concerns ease globally.

By the Numbers

S&P 500: up 0.5%, approaching record levels
Nasdaq composite: up 0.7%
Dow Jones Industrial Average: down 47 points (0.1%)
July wholesale inflation: 4.7% year-over-year (down from 5.5% in June)
10-year Treasury yield: 4.64% (down from 4.72% on Monday)
Brent crude oil: $87.67 per barrel, down 1.5%
Probability of Fed rate hike in September: 34% (down from 50% two days prior)

Fed Rate Expectations Shift Lower

Traders are now pricing in just a 34% probability that the Federal Reserve will raise interest rates at its September meeting, down from 50% two days earlier. The drop reflects growing confidence that inflation may be moving toward the Fed’s target without requiring additional rate hikes to slow economic activity.

If inflation continues its current downward trajectory, policymakers may opt to maintain rates at current levels, potentially avoiding the economic drag that rate increases typically create. Lower rate expectations have historically supported equity valuations and reduced borrowing costs for consumers and businesses.

What’s Next

Investors will continue monitoring inflation data, oil prices, and Fed communications as clues to the central bank’s next move. The market’s proximity to record highs suggests growing confidence in a soft-landing scenario—one in which inflation moderates without triggering a recession. However, geopolitical tensions and their economic effects remain a wildcard, and energy prices could resume their volatility if regional conflicts escalate.

The next major catalyst will likely be the Federal Reserve’s policy decision and guidance in coming weeks. Markets are also watching for further signals from major corporations on earnings and economic conditions, with technology and financial sectors particularly under scrutiny as rate expectations shift.

For now, the combination of moderating inflation, receding oil prices, and fading rate-hike fears has created a favorable backdrop for equities, particularly in sectors sensitive to interest rates and economic growth.