U.S. equities concluded trading higher on Thursday, with key indices like the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite achieving new record closes. This market performance occurred despite August consumer price data exceeding market expectations and the Federal Trade Commission initiating a probe into leading AI chatbot developers over safety concerns.

Market Overview: Equities Climb Despite Inflation and AI Regulatory Scrutiny

U.S. equities closed higher on Thursday, September 11, 2025, with major indices reaching new record highs. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all posted significant gains, defying a hotter-than-expected August consumer inflation report and the announcement of a Federal Trade Commission (FTC) inquiry into the safety practices of prominent AI chatbot developers.

August Inflation Figures Exceed Expectations

The U.S. annual inflation rate accelerated to 2.9% in August 2025, marking the highest level since January and surpassing the 2.7% recorded in June and July. Monthly, the Consumer Price Index (CPI) rose by 0.4%, exceeding forecasts of 0.3% and representing the largest monthly increase since January. This acceleration was primarily driven by rising prices in several key categories.

Notable increases were observed in food (3.2% compared to 2.9% in July), used cars and trucks (6% versus 4.8%), and new vehicles (0.7% against 0.4%). After seven months of declines, energy costs also saw an increase of 0.2%. While gasoline and fuel oil prices continued to decrease, their rate of decline was less pronounced than in previous months, at -6.6% and -0.5% respectively. Natural gas prices remained elevated at 13.8%. Shelter costs continued to exert significant upward pressure, rising 0.4% and contributing substantially to the overall inflation increase. Conversely, core inflation, which excludes volatile food and energy prices, remained steady at 3.1% annually, matching July's rate and February's peak. Monthly core CPI also held firm at 0.3%.

FTC Launches Inquiry into AI Chatbot Safety

In parallel with the inflation data, the FTC announced a comprehensive inquiry into how several major technology companies develop, test, and monitor their consumer-facing AI-powered chatbots. The probe targets prominent firms including Alphabet (GOOGL), Meta Platforms (META), OpenAI, Character.AI, Snap (SNAP), and xAI.

Specifically, the FTC seeks information on how these companies measure and mitigate potential negative impacts of their AI chatbots, with a particular focus on the implications for children and teens. Concerns raised include the chatbots' ability to mimic human communication and emotions, which could lead users, especially younger ones, to form inappropriate relationships. The inquiry will also delve into how these companies monetize user engagement, process user inputs, generate outputs, and utilize data gathered from chatbot conversations. This comes amidst reports of internal policies at Meta concerning chatbots and children, and a lawsuit against OpenAI regarding a teen's suicide potentially linked to ChatGPT.

Market Reaction: Defying Expectations with Anticipated Fed Easing

Despite the initial market jitters caused by the hotter-than-expected CPI report, U.S. equities quickly recovered and rallied. The market's resilience was attributed to investors largely interpreting the inflation data as not severe enough to deter the Federal Reserve from an anticipated 25 basis point (0.25%) interest rate cut at its upcoming central bank meeting. This expectation of monetary easing appears to have fueled investor optimism.

By market close, the Dow Jones Industrial Average surpassed 46,000 for the first time, ending the day at a record 46,108, an increase of 1.36%. The S&P 500 rose to a new record of 6,587.47, advancing 0.85%. The Nasdaq Composite achieved its fourth consecutive record close, rising 0.72% to 22,043.07. The broader Russell 2000 also saw significant gains, jumping 1.72% to 2,418.95%.

Broader Context and Implications

The persistent elevation of inflation, particularly in categories like shelter and core goods, presents a complex challenge for the Federal Reserve. While market participants are pricing in a rate cut, the underlying price pressures indicate that the Fed's long-term 2% inflation target remains elusive. This delicate balancing act between managing inflation and supporting economic growth will be a critical determinant of future monetary policy.

Simultaneously, the FTC inquiry signals a burgeoning regulatory environment for the rapidly evolving artificial intelligence sector. This increased scrutiny could lead to new compliance burdens for major technology companies and potentially influence the pace and direction of AI innovation, particularly in consumer-facing applications. The focus on safeguarding children and teens highlights growing societal concerns surrounding the ethical deployment of advanced AI technologies.

Expert Commentary

Character.AI expressed eagerness to engage with the FTC, stating the company "looks forward to providing insight on the consumer AI industry and the space's rapidly evolving technology," while noting its recent implementation of safety features. A spokesperson for Snap echoed this sentiment, stating, "we share the FTC's focus on ensuring the thoughtful development of generative AI, and look forward to working with the Commission on AI policy that bolsters U.S. innovation while protecting our community." FTC Chairman Andrew N. Ferguson underscored the agency's dual mandate, noting, "Protecting kids online is a top priority for the Trump-Vance FTC, and so is fostering innovation in critical sectors of our economy."

Looking Ahead

Investors will closely monitor upcoming Federal Reserve announcements for further clarity on interest rate policy, as the market continues to anticipate a cut despite sustained inflation. Future CPI reports will be crucial in gauging the trajectory of price pressures. Concurrently, developments in the FTC's AI chatbot inquiry will be a key area of focus for the technology sector, as regulatory outcomes could shape future product development, user safeguards, and the competitive landscape for AI innovations.