US stocks soared as investor confidence grew on softer-than-expected inflation data.

The Bureau of Labor Statistics reported that the Producer Price Index (PPI) rose by just 0.1% in July, below the estimated 0.2%. Year-over-year, prices were up 2.3%, marking a cooldown from June.

Investors are now focused on Wednesday's Consumer Price Index (CPI) report for further signs of disinflation. Most traders now expect the Federal Reserve to pursue a 50 basis point rate cut next month, according to the CME FedWatch Tool.

"The runway is clear for the Fed to cut rates in September," said Jamie Cox, managing partner at Harris Financial Group. "If data like this persists, the Fed will have plenty of room to cut rates further this year."

Starbucks led major stock gainers, rising 23% on the news that Chipotle CEO Brian Niccol would take over leadership. Chipotle shares dropped as much as 14% before recovering slightly.