Wall Street opened sharply higher on Wednesday night, with all three major indices climbing more than 1%. The tech-heavy Nasdaq 100 also advanced over 1%, while the Philadelphia Semiconductor Index jumped more than 2%. Gold and silver gained, though they gave back some of their earlier advances. Oil prices, meanwhile, fell sharply. Chinese assets listed in the U.S. rose as well, with the index of Chinese stocks up nearly 1%.

The pullback in oil prices helped lift market sentiment. At the same time, traders largely set aside concerns about the latest U.S. inflation data, even as it strengthened expectations for a Federal Reserve rate hike. The August consumer price index rose 0.4% month over month and 3.4% year over year, in line with forecasts. Core CPI, which excludes food and energy, increased 0.3% month over month—slightly above expectations. Following the release, CME Group's FedWatch tool showed an 85.6% probability that the Fed will hike rates by 25 basis points next week.

Why would stocks rally on news of a looming rate increase? At first glance, the move seems counterintuitive. Higher rates generally weigh on equities by raising borrowing costs, which can dampen consumer spending, squeeze corporate margins, and make safer assets like bonds more attractive. But a plausible explanation is that investors finally have greater clarity on policy direction. Many believe today's inflation report all but locks in a rate hike at next week's meeting, removing a key source of uncertainty: whether Fed Chair Kevin Warsh is truly committed to curbing inflation decisively.

Another factor supporting stocks could be the retreat in international oil prices from recent highs. One analyst noted, "The market debate has quickly shifted from 'Will the Fed hike or not?' to the more pressing question of how many hikes this cycle will ultimately require. We expect this will not be a one-and-done move. This is no longer about fine-tuning the economy—after roughly five years of inflation running above target, policymakers will likely conclude that restoring price stability may demand more than a single hike."

The data, the analyst added, is "hot enough" to justify tightening, which—against a backdrop of concerns over excessively loose policy potentially fueling further inflation—may actually be viewed as a positive by markets. Bret Kenwell of eToro highlighted a different concern: what happens after the hike. "If the Fed frames this as an 'insurance measure' against a resurgence of inflation, rather than the start of a prolonged tightening cycle, the market might interpret it as a 'dovish hike.' In that scenario, even if short-term Treasury yields stay elevated, the upward pressure on long-term yields could be limited," he said.

Among individual stocks, widely held tech names rallied strongly, with Dell surging 10% and Marvell Technology climbing more than 4%. Memory chip stocks, however, underperformed. With the weekend approaching, investors can take a breather as markets head into a well-deserved rest.