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Stock Market Today - 8/10: Stocks Surge As July Inflation Data Clips Fed Rate Hike Bets; Elon Musk Tesla Sale Boosts Twitter

Wall Street remains laser-focused on a crucial July inflation reading before the bell that could trigger near-term changes to Fed rate hike bets.

Updated at 4:29 pm EST

U.S. stocks closed firmly higher Wednesday, while the dollar slipped lower against its global peers, as investors reacted to a key July inflation reading that looks to have triggered a pullback in rate-hike bets.

Headline CPI  eased last month from the 41-year peak rate of 9.1% it reached in June to a pace of 8.5%, the Bureau of Labor Statistics said Wednesday, potentially triggering a series of slower accelerations over the months ahead. 

U.S. economic data of late has been mixed, however, and last week's blowout jobs report ,which included 528,000 new hires alongside wage growth of 5.2%, could add to inflationary pressures heading into the autumn.

The CME Group's FedWatch is now pricing in a 36.5% chance of a 75 basis point Fed rate hike in September, down from 66.5% prior to the inflation release, which would take its target rate to between 3% and 3.25%, with the bulk of expectation pointing to a range of between 3.5% and 3.75% by the end of the year.

That's kept the U.S. dollar index, which tracks the greenback against a basket of six global currency peers, within touching distance of the two-decade highs it reached last month, a move that has added significant headwinds to corporate earnings prospects as companies find it increasingly expensive to bring home overseas profits.

The dollar index was marked 1.19% lower in overnight trading at 105.104 while benchmark 2-year Treasury notes yields fell 10 basis points to 3.146%.

"The decline in Inflation, which peaked a few months ago, is now showing up in the headline data in a meaningful way," said Jamie Cox, managing partner at Harris Financial Group in Richmond, Virginia. "The Fed now has plenty of cover to reduce the pace and size of future rate hikes. This is really good news and decreases the odds of stagflations and the need for a big recession to break the back of embedded inflation."

In overseas markets, European stocks, which were essentially flat amid the traditional August holiday lull ahead of the inflation release, rose 0.8% in mid-day Frankfurt trading. 

Overnight in Asia the region-wide MCSI ex-Japan index fell 1.07% amid a pullback in China stocks following data showing factory gate inflation fell to the lowest levels in 17 months amid a pullback in demand for raw materials in the world's second largest economy.

The softer China inflation reading added downward pressure on oil prices, as well, although WTI crude futures for September delivery were last seen $1.07 higher on the session at $91.57 per barrel following  Energy Department data that showed emergency crude stockpiles at their lowest levels since 1985.

On Wall Street, the S&P 500 gained 87.7 points by the close of trading while the Dow Jones Industrial Average ended 535 points in the green. The tech-focused Nasdaq gained 360 points. 

In the tech space, Apple  (AAPL)  shares rose 2.6% after Foxconn, the world's biggest electronics manufacturer, posted better-than-expected second quarter earnings Wednesday but cautioned that waning smartphone demand would keep revenues in check heading into the autumn months. 

Tesla  (TSLA)  and Twitter  (TWTR)  were also actitve, following news from late last night that CEO Elon Musk had sold around $7 billion worth of stock in order to set aside funding for his disputed takeover of the social media platform.

Walt Disney  (DIS)  shares edged higher ahead of the media and entertainment giant's third quarter earnings after the closing of trading, with investors focused on subscriber gains in its signature Disney+ steaming division. 

Coinbase Global  (COIN)  shares, meanwhile, rose 7.4% after the crypto trading platform posted a wider-than-expected second quarter loss amid the ongoing slide in bitcoin and other digital tokens.