The Dow Jones Industrial Average ticked up Wednesday after the release of more encouraging U.S. inflation data.

The 30-stock Dow climbed 242 points, or 0.61%, to end the day at 40,008.39. The S&P 500 inched up 0.38% to close at 5,455.21, and marked its fifth straight winning day. The Nasdaq Composite shook off earlier losses to close higher by just 0.03% at 17,192.60.

Consumer prices increased 2.9% year-over-year, down from 3% in June and the lowest reading since March 2021, the Bureau of Labor Statistics said on Wednesday. Month-over-month, prices ticked up 0.2%. Economists polled by Dow Jones expected a 0.2% increase from the prior month and a 3% gain year-over-year.

So-called core inflation, which strips out food and energy from the headline number, advanced 0.2% on the month, also in line with expectations.

The report comes a day after lighter-than-expected wholesale inflation figures gave stocks a boost. The Dow rose about 1%. The S&P 500 climbed 1.7%, while the Nasdaq gained 2.4%.

Investors had been looking toward the CPI reading to get a full-plated picture of the state of the economy, and to further solidify the prospect of an interest rate cut at the central bank's September meeting.

"It may not have been as cool as yesterday's PPI, but today's as-expected CPI likely won't rock the boat," said Chris Larkin, managing director of trading and investing for E-Trade from Morgan Stanley. "Now the primary question is whether the Fed will cut rates by 25 or 50 basis points next month."

Futures market pricing is roughly split down the middle between expectations for a quarter or half-percentage point reduction at central bank meeting on Sept.17-18, per the CME FedWatch Tool.
By the end of the year, traders expect a basis point shift.

"If most of the data over the next five weeks points to a slowing economy, the Fed may cut more aggressively," Larkin said.

Elsewhere, shares of Kellanova surged more than 7.8% following news that the company would be acquired by snack maker Mars in a $36 billion deal. Shares of Google-parent company Alphabet slipped 2.3% following news that the U.S. Department of Justice was weighing an effort to break up the technology behemoth.

All three major averages are now above their Aug. 2 closing level, which was the session before the global market sell-off on Aug. 5 that appeared to be related to an unwind of the yen carry trade and concerns about economic growth.

"While growth risks have increased, we believe the market has overreacted to a small number of soft data points, not a drastic change to the macro outlook." said Gargi Chaudhuri, chief investment and portfolio strategist at BlackRock.