U.S. equities rallied to fresh records on Tuesday after government data showed inflation held slightly below economists’ expectations, reinforcing market conviction that the Federal Reserve will begin cutting interest rates next month. The Labor Department said its Consumer Price Index rose 0.2% in July and 2.7% from a year earlier, compared with forecasts for a 2.8% annual increase. Core prices, excluding food and energy, advanced 0.3% on the month and 3.1% on the year, the highest core reading since January but broadly in line with estimates. Following the release, futures markets tracked by CME Group priced the probability of a 25-basis-point cut at the 17 September Federal Open Market Committee meeting at close to 90%. The two-year Treasury yield, which is sensitive to policy expectations, slipped four basis points to 3.73%, while the 10-year yield edged to 4.29%. The dollar weakened against major peers. Equity gains were led by large-cap technology and small-capitalisation shares. The S&P 500 climbed 1.1% to 6,445.76, closing above 6,400 for the first time. The Nasdaq Composite added 1.4% to 21,681.90 and the Dow Jones Industrial Average rose 1.1% to 44,458.61. The Russell 2000 jumped nearly 3%, reflecting optimism that lower borrowing costs could broaden the rally beyond the megacap technology sector.