NEW YORK—Stocks rallied to three-month highs on Wall Street Wednesday as investors welcomed a government report showing that inflation cooled more than expected last month.
The encouraging inflation update sparked speculation that the Federal Reserve may not have to remain as aggressive about hiking interest rates as feared. The central bank has been raising rates in an effort to slow the economy in the hopes of stamping out inflation, but that risks bringing on a recession if the Fed moves too aggressively.
The S&P 500 rose 87.77 points, or 2.1 percent, to 4,210.24. The gains broke a four-day losing streak and pushed the benchmark index to its highest levels since early May. It is now nearly 15 percent above its mid-June low….