Stocks logged fresh highs after a benign inflation report on Tuesday, as the market bet on a September rate cut.

The S&P 500 rose 1.1% to clinch a record close, its 16th record of the year. The Nasdaq rose 1.4%, and marked an all-time high as well, logging its 19th record of 2025. During intraday trading, the two indexes set intraday records.

The Dow gained 484 points or 1.1%.

The market’s rise was steady and unobstructed thanks to July’s inflation report. U.S. businesses paid a record $28.4 billion in gross customs receipts to the government in July due to tariffs. That’s a 273% increase from last year.

That increase is expected to show up in prices for consumer products at some point, but July’s report showed no major evidence of that. Headline inflation held steady at 2.7% in July.

A more contained inflation is good news for Americans, although one downside is that it “means firms are tolerating a profits margin squeeze,” highlights Neil Dutta, head of economic research at RenMac. “Firms will need to offset the squeeze somehow. That likely implies a continued slowing in employment, hours, cuts to capex or if firms want to roll the dice, a future increase in prices.”

Still, investors seem to be ignoring that for now and are focused more on rate cuts. Traders are betting on a 94% probability for a September rate cut. Odds for additional cuts in October and December have also risen.

Interest rate cuts are all good news for investors: They can lower the cost at which companies borrow money. Lower rates can also help them expand, boost hiring, and help increase profits.

The downside here is the cuts could come at a time when inflation momentum from tariffs is slowly building.

Household furnishings and supplies, a closely watched area for tariff effects, showed a 0.7% increase in July after a 1% increase in June. Footwear prices rose 1.4%. The price of coffee jumped 2.3% and is poised to move higher given tariffs on Brazil, a major exporter, went into effect Aug. 7.

“The effective tariffs rate was a little north of 9% in June. That doubled again in early August,” wrote Diane Swonk, KPMG chief economist. “Tariffs are still working their way into consumer prices.”

In the bond market, the front-end or 2-year Treasury declined by 0.023 percentage point to 3.730% today, a nod to the September rate cut. The 10-year and 30-year yields both increased, although not by much.

Dollar and gold both declined. When investors feel ready to buy into riskier assets like stocks, it is normal to see haven assets, like precious metals and reserve currencies, decline.