Stocks rose higher Wednesday as fresh inflation data pointed to cooling price pressures, raising market sentiment that the Federal Reserve can bring down inflation without causing an economic recession. The Dow Jones Industrial Average added over 85 points, while the S&P 500 Index and Nasdaq Composite rose 0.75% and 1.2%, respectively.

Here's how the market settled on Wednesday:

S&P 500 Index (SPY  ): +0.74% or +32.90 points to 4,472.16

Dow Jones Industrial Average (DIA  ): +0.25% or +86.01 points to 34,347.43

Nasdaq Composite Index (QQQ  ): +1.15% or +158.26 points to 13,918.96

Driving market moves, the Consumer Price Index rose 3% year-over-year in June -- its lowest annual rate in more than two years -- and a 0.2% increase over last month, both coming in below estimates.

Meanwhile, core CPI -- which excludes volatile food and energy prices -- rose 4.8% from a year ago and 0.2% on a monthly basis, also below estimates and marking the lowest annual increase since October 2021.

While this is good news when it comes to the health of the U.S. economy, inflation is still running hotter than the Fed's 2% annual target. Traders are still pricing in a 92% chance of an interest rate hike at the central bank's upcoming policy meeting later this month, according to the CME FedWatch Tool.

However, June's inflation report has caused bets that the Fed will raise rates at its September meeting to fall to 13% from 22% on Tuesday and 18% from a week ago. Moreover, the chance that the central bank will increase rates at its November meeting are now about 26% from 36% on Tuesday and 31% one week ago.

Elsewhere, Amazon's (AMZN  ) Prime Day sales event raked in $6.4 billion online sales in the United States on Tuesday, rising 6% from last year and marking the single largest e-commerce day for far this year, according to Adobe Analytics. Adobe expects total U.S. online sales to grow 9.5% year-over-year to $13.1 billion during the two-day event; U.S. consumers spent $11.9 billion at Prime Day last year.

Nvidia (NVDA  ) announced a $50 million investment deal with Recursion Pharmaceuticals (RXRX  ) on Wednesday, with the two companies using the partnership to "accelerate groundbreaking foundation models in AI-enabled drug discovery." Shares of Recursion rose over 100% on the day.

"With our powerful dataset and NVIDIA's accelerated computing capabilities, we intend to create groundbreaking foundation models in biology and chemistry at a scale unlike anything that has ever been released in the biological space," said Chris Gibson, CEO of Recursion, in a statement.

Looking ahead, market participants will assess June's Producer Price Index due out Thursday morning for more clues on the Fed's next moves. Thursday will also see earnings reports from Pepsico (PEP  ) and Delta Air Lines (DAL  ) as the second quarter earnings season kicks off this week.