Nasdaq hits record, Dow, S&P 500 rise with inflation data set to test rate-cut trade

US stocks moved higher on Monday as investors set their sights on inflation data later this week to provide a reality check on the chances of a jumbo interest-rate cut next week.

The S&P 500  moved up around 0.2%, while the Nasdaq Composite  closed at a record high, up around 0.5% on the day. Meanwhile, the Dow Jones Industrial Average climbed 0.2%. The moves come after stocks finished last week on a down note.

Wall Street is already looking ahead to key inflation reports later this week: the producer price index (PPI) on Wednesday and the consumer price index (CPI) on Thursday. Together, the data will offer fresh insight into the strength of the economy after last week's weak August jobs print and other soft labor market data, as questions about recession start to emerge.

The reports will test markets' total conviction that the Federal Reserve will lower interest rates at its meeting next week. The debate now centers on how deep policymakers will cut, amid rising expectations for a bumper "catch-up" move of 50 basis points, rather than 25 basis points. As of Monday, the vast majority of bets, around 88%, are on the smaller cut.

On Tuesday, the Bureau of Labor Statistics revision to earlier months' jobs data on Tuesday will likely be more closely watched than usual, coming days after the August jobs report revealed more weakness in the labor market.