Oil prices hit their lowest levels since 2021 on Tuesday but bounced back on Wednesday.

On Wednesday, West Texas Intermediate (CL=F) rose roughly 2% to settle at $67.14 per barrel, while Brent (BZ=F) also rose about 2% to close at $70.49 per barrel.

It appears the market has come to its conclusion on what the Federal Reserve will do at its Sept. 18 meeting.

After a hotter-than-expected inflation reading on Wednesday, investors were placing the probability of the Fed lowering rates by 50 basis points at its meeting next week at just 13%, down from the 44% chance seen a week prior and more than 50% chance seen a month ago, per the CME FedWatch Tool.

"We expect that the Fed is going to cut 25 bps at the FOMC meeting next week," Jefferies US economist Thomas Simons wrote in a note to clients on Wednesday. "[The August CPI] data should snuff out the last remaining forecasts for a 50 bp cut."

With the 25 or 50 debate all but settled, all eyes will shift to what the Fed says next week about its plans for interest rate cuts through the rest of 2024. As of Wednesday, markets are expecting 100 basis points of cuts from the Federal Reserve this year. More clues on the Fed's thinking will come on Sept. 18 when the Federal Reserve releases its Summary of Economic Projections, including its "dot plot," which maps out policymakers' expectations for where interest rates could be headed in the future.

Nvidia (NVDA) stock soared more than 6% on Wednesday as CEO Jensen Huang spoke at the Goldman Sachs Communacopia and Technology Conference.

Yahoo Finance's Yasmin Khorram reports:

Huang told the audience though generative AI is still in its early days, it’ll expand beyond data centers. “Now what’s amazing is, so the first trillion dollars of data centers is going to get accelerated and invented this new type of software called generative AI. Generative AI is not just a tool, it’s a skill," Huang told Goldman Sachs CEO David Solomon.

"For the first time, we’re going to create skills that augment people.”

Following Nvidia's brutal sell-off last week, Huang's keynote was seen as an opportunity to calm investors' nerves.

“The infrastructure players, like ourselves, and all the cloud service providers, put the infrastructure in the cloud so that developers can use these machines to train the models and fine-tune the models, guardrail the models,” Huang said. “And the return on that is just fantastic.”

According to Huang, for every dollar a cloud service provider spends with Nvidia, it translates to $5 worth of rentals.

“I think the days of every line of code being written by software engineers, those are completely over,” Huang said. “The idea that every one of our software engineers will essentially have companion digital engineers 24/7 — that’s the future.”

For example, Huang shared that Nvidia has 32,000 employees, who will be supplemented by “hopefully 100x more digital engineers” in the near future.

Nvidia servers "look expensive, and it could be a couple of million dollars per rack, but it replaces thousands of nodes," Huang said. "The amazing thing is, the cables of connecting old, general purpose computing systems cost more than replacing all of those and densifying into one rack."

GameStop (GME) stock fell more than 14% after the company's latest quarterly financial release fell short of Wall Street's expectations.

GameStop posted earnings per share of $0.04 in the most recent quarter, better than the $0.09 per share loss analyst had expected but the video game retailer's quarterly revenue of $798 million fell well short of expectations of $896 million.

The company also disclosed an "at the market" stock offering of up to 20 million shares.

"Revenue continues to fall dramatically year-over-year as GameStop closes stores and more games are sold digitally," Wedbush analyst Michael Pachter wrote in a note to clients on Wednesday morning.

Pachter added, "While we admire GameStop’s ability to manage operating losses, we think it would be just as reasonable for management to close all of its stores and operate as a bank. GameStop has roughly $10 per share in cash now, but without a hint of any strategy that would reasonably deploy capital, we do not see why shares trade at [two times] cash."

"Trump trades" fell on Wednesday after a fiery debate between former President Donald Trump and his democratic rival Vice President Kamala Harris.

Trump Media & Technology (DJT) dropped 13% as post-debate commentary described Trump as defensive with Harris appearing to get under her rival's skin.

Shares of the company, which operates Truth Social, have been sensitive to Trump's bid for the presidency.

The stock has fallen almost 60% since around mid-July as it became more apparent that Biden would be replaced as the Democratic presidential candidate.

Private prison stocks — a beneficiary of Trump’s staunch position on illegal immigration and support of increased border patrol — also sank on Wednesday. GEO Group (GEO), a Boca Raton, Fla.-based company that invests in private prisons, fell more than 8%.

CoreCivic (CXW), formerly the Corrections Corporation of America, which owns and manages private prisons and detention centers in the US, also dropped 6%.

Bitcoin (BTC-US) also took a sharp turn lower during the combative debate and into Wednesday trading, hovering near the $57,000 level. The former president has taken a pro-crypto position, even calling for a strategic national bitcoin stockpile.

Read more here.

After a hotter-than-expected inflation reading on Wednesday, markets have quickly moved to price in a higher likelihood that the Federal Reserve will opt for a small interest rate cut at its September meeting.

Markets sold off following the read-through that the Fed won't cut interest rates by 50 basis points as some had hoped. The S&P 500 (^GSPC) and Dow Jones Industrial (^DJI) both fell more than 1.5% within two hours of the report before paring some losses.

But some strategists have argued that a 25 basis point cut would be a more welcome sign from the Federal Reserve.

Yardeni Research chief markets strategist Eric Wallerstein reasoned the Fed likely wouldn't cut by more than 25 basis points "absent recessionary conditions or a financial crisis emerging."

"For everyone who's asking for a 50 basis point cut, I think they should really reconsider, the amount of volatility that would cause in short-term funding markets," Wallerstein told Yahoo Finance. "It's just not something the Fed wants to risk."

To Wallerstein's point, while the most recent jobs report showed continued signs of slowing in the labor market, economists largely reasoned the August jobs report didn't reveal the substantial cooling that many believed would be needed to prompt a deeper cut from the Fed. The same could be said for the August Consumer Price Index (CPI), which showed prices increased at the lowest annual rate since early 2021.

But details inside the report showed on a "core" basis, which strips out the more volatile costs of food and gas, prices in August climbed 0.3% over the prior month, above Wall Street's expectations for a 0.2% increase.

"The unwelcome news on inflation will distract slightly from the Fed's renewed focus on the labor market and makes it more likely that officials stick with a more measured approach to easing, beginning with a 25 [basis point] cut next week," Oxford Economics deputy chief US economist Michael Pearce wrote in a note to clients on Wednesday.

Further clues into what the Fed is expecting the interest rate cut cycle to look like will come on Sep. 18 when the Federal Reserve releases its Summary of Economic Projections, including its "dot plot," which maps out policymakers' expectations for where interest rates could be headed in the future.

As of Wednesday morning, markets are expecting 100 basis points of cuts from the Federal Reserve this year. Wallerstein reasoned that if the total amount of Fed cuts this year falls short of the market's expectations that isn't necessarily a bad thing for stocks, though.

"If those rate cuts get priced out because growth is stronger than expected and GDP comes in strong for the third quarter and the labor market indicators aren't too bad, and we keep seeing consumer spending [increasing], then stocks will have more room to run as earnings continue to grow," Wallerstein said.

The latest Consumer Price Index (CPI) report released Wednesday showed that housing inflation still isn't easing.

According to data from the Bureau of Labor Statistics, shelter costs, the biggest contributor to overall inflation, ticked up 0.5% month over month in August, higher than July’s 0.4% increase. On an annual basis, shelter costs rose 5.2% in August, up from July’s year-over-year gain of 5.1%.

Economists have been expecting a slowdown in rent increases that has been reflected in separate data to show up in the CPI for over a year. An influx of new apartment supply has helped bring rents down from highs seen in 2022.

But there has been a lag to how quickly the trend has shown up in the CPI report. Unlike other sources that track rents on a monthly basis, BLS collects rent data every six months.

"The housing component of the inflation report was the only real standout surprise as it came in stronger than expected," Jack McIntyre, portfolio manager at Brandywine Global Investment Management, wrote in a note after the CPI's release.

According to the report, rents gained 0.4% in August from the previous month, slightly lower than July's 0.5% increase. Meanwhile, owners' equivalent rent was up 0.5% for the month, higher than July's 0.4% rise. Owners' equivalent rent is the estimated rent a homeowner would pay if they were renting their own property.

"To see OER accelerating at this point is very strange, very difficult to explain. There's a lot of nuances and unusual things in this data. It's very noisy," Brian Rose, UBS global wealth management senior economist, told Yahoo Finance after the released report.

One Wall Street firm that had been clamoring for a 50 basis point interest rate cut from the Federal Reserve as economic data slows no longer thinks that will be the result of next week's policy decision.

On Wednesday, the August Consumer Price Index (CPI) report showed "core" prices, which strip out the more volatile costs of food and gas, climbed 0.3% over the prior month, above the 0.2% economists had expected.

Citi chief US economist Andrew Hollenhorst wrote in a note to clients that signs of sticking housing inflation pushing core inflation higher than expected is "probably just enough to convince the FOMC to cut 25 [basis points] rather than 50 [basis points] at next week's meeting."

Still, Hollenhorst argued that "overall trajectory for core PCE inflation (or Fed policy) is not substantially changed by this reading." Citi still sees the Fed cutting rates by 125 basis points this year, as cooling in the labor market will remain a key concern for the central bank.

Stocks were firmly in the red on Wednesday morning.

The benchmark S&P 500 (^GSPC) fell more than 1%, while the tech-heavy Nasdaq Composite (^IXIC) was off about 0.8%. The Dow Jones Industrial Average (^DJI) dropped about 1.5%, or more than 600 points, extending losses from the prior trading session.

Interest rate-sensitive areas of the market were among the day's biggest losers as investors trimmed their bets on the Federal Reserve opting for a larger interest rate cut at its September meeting.

Financials (XLF) were off more than 2%, while Real Estate (XLRE) slid more than 1.7%.

US stocks wavered on Wednesday as investors digested an inflation report that showed consumer price increases ticked lower during August and analyzed the first presidential debate between Donald Trump and Kamala Harris.

The benchmark S&P 500 (^GSPC) fell about 0.1% while the tech-heavy Nasdaq Composite (^IXIC) climbed about 0.3%. The Dow Jones Industrial Average (^DJI) dropped about 0.6% or roughly 250 points, extending losses from the prior trading session.

The immediate read through from Wednesday morning's fresh reading on inflation appears to be that it won't be enough to push the Federal Reserve to cut interest rates by 50 basis points at its meeting next week.

Data from the Consumer Price Index in August showed headline inflation slipping to a more than three-year low. But "core" prices, which strip out the more volatile costs of food and gas, climbed 0.3% over the prior month, above the 0.2% economists had expected.

After a mixed monthly jobs report, the price data was expected to help settle the debate over whether to expect a 0.5% or 0.25% easing in the Fed's policy decision next week. And after a hotter-than-expected month-over-month increase for core inflation, traders are now favoring a smaller cut from the Fed at its meeting next week.

"The unexpectedly strong rise in core inflation in August reflected upward surprises in shelter and transport services, which we do not think will be sustained," Oxford Economics deputy chief US economist Michael Pearce wrote in a note to clients. "Even so, the unwelcome news on inflation will distract slightly from the Fed's renewed focus on the labor market and makes it more likely that officials stick with a more measured approach to easing, beginning with a 25bp cut next week."

Following Wednesday's CPI reading, the odds of the Fed lowering rates by 50 basis points were just 15%, down from the 44% chance seen a week prior, per the CME FedWatch Tool.

A closely watched report on US inflation showed consumer price increases ticked lower during the month of August on an annual basis, according to the latest data from the Bureau of Labor Statistics released Wednesday morning.

The Consumer Price Index (CPI) increased 2.5% over the prior year in August, which was a deceleration compared to July's 2.9% annual gain in prices. The yearly increase was also in line with economist expectations.

The index rose 0.2% over the previous month, matching both July's monthly increase and what economists had expected.

On a "core" basis, which strips out the more volatile costs of food and gas, prices in August climbed 0.3% over the prior month and 3.2% over last year. Core prices rose 0.2% month over month and 3.2% on an annual basis in July.