The CNN Money Fear and Greed index showed an improvement in the overall market sentiment, but the index remained in the "Fear" zone on Wednesday.

U.S. stocks settled higher on Wednesday, following the release of inflation data. U.S. annual inflation rate eased for a fifth straight month to 2.5% in August from 2.9% in the previous month, and down from market estimates of 2.6%.

Shares of NVIDIA Corporation (NASDAQ:NVDA) gained around 8.2%, while Advanced Micro Devices, Inc. (NASDAQ:AMD) shares added around 4.9% during the session. Shares of Rentokil Initial plc (NYSE:RTO) dipped 21% after the company revised the guidance for the second half of FY24.

Most sectors on the S&P 500 closed on a positive note, with communication services, information technology and consumer discretionary stocks recording the biggest gains on Wednesday. However, energy and consumer staples stocks bucked the overall market trend, closing the session lower.

The Dow Jones closed higher by around 125 points to 40,861.71 on Wednesday. The S&P 500 rose 1.07% to 5,554.13, while the Nasdaq Composite jumped 2.17% at 17,395.53 during Wednesday's session.

Investors are awaiting earnings results from The Kroger Co. (NYSE:KR), Signet Jewelers Limited (NYSE:SIG) and Adobe Inc. (NASDAQ:ADBE) today.

What is CNN Business Fear & Greed Index?

At a current reading of 43.1, the index remained in the "Fear" zone on Wednesday, versus a prior reading of 38.5.

The Fear & Greed Index is a measure of the current market sentiment. It is based on the premise that higher fear exerts pressure on stock prices, while higher greed has the opposite effect. The index is calculated based on seven equal-weighted indicators. The index ranges from 0 to 100, where 0 represents maximum fear and 100 signals maximum greediness.