Wall Street stocks finished higher on Wednesday, reversing early losses following an inflation report expected to keep the Federal Reserve on track to cut interest rates next week.

Semiconductor companies – which have been under pressure in recent weeks – led Wednesday's gains, with artificial intelligence star Nvidia rising eight percent and Micron and Intel also notching big gains.

The tech-rich Nasdaq led major indices, rising 2.2 percent to 17,395.

The Dow Jones gained 0.3 percent to 40,861, while the S&P 500 advanced 1.1 percent to 5,554.

The consumer price index rose 2.5 percent in August from a year ago, down from a 2.9 percent increase in July. It was the lowest annual figure since February 2021.

However, a measure of inflation that strips out volatile food and energy costs rose by a larger-than-expected 0.3 percent from a month earlier.

While investors widely expect the Federal Reserve to cut interest rates later this month, markets have been unsure of how big the cut will be.

Following Wednesday's inflation data, futures markets showed a jump in expectations for a smaller 0.25 percent cut instead of a half-point cut.

As the day progressed, investors realised the initial sell-off was an overreaction to the CPI data and that a Fed rate cut will still be positive, said Art Hogan, chief market strategist at B Riley Wealth

Among individual companies, Trump Media & Technology Group tumbled 10.5 percent following a presidential debate in which some observers pegged Vice President Kamala Harris the winner over former president Donald Trump. (AFP)