US stocks rose on Tuesday after the latest consumer price index report stoked bets that the Federal Reserve is virtually certain to resume cutting interest rates next month.
The S&P 500 Index rose 0.6% soon after the opening bell in New York, while the tech-heavy Nasdaq 100 Index gained 0.7%.
While underlying US inflation accelerated in July to fastest pace since the beginning of the year, the figures were broadly in line with economists expectations. That prompted relief in markets, which had braced for the possibility that a tariff-fueled price spike would sow doubt over when the Fed will start easing monetary policy.
The data was “tame enough that it gives the Federal Reserve the green light to cut rates by at least 25 basis points in September and opens the possibility of a larger 50-basis-point cut,” said Skyler Weinand, chief investment officer at Regan Capital.
Quilter’s Lindsay James described the latest inflation figures as a “somewhat messy data print,” though noted it contained things that would please all political persuasions.
“Two rate cuts are expected by the year end, and if inflation can remain in check like this then they should be able to be delivered,” James said. “But any signs that its stickiness gets worse and begins climbing again, and those rate cuts will need to be called into questions.”
Bonds rose after the report and derivative traders started pricing in a roughly 90% chance that the Fed will reduce its benchmark rate by a quarter percentage point when it meets again next month.
For stock investors, however, the report does not do much to change the overall backdrop, according to Tony Welch, chief investment officer at SignatureFD.
“Economic growth is easing but not near recession levels and inflation has not broken out to levels that could be problematic,” said Welch. “In that environment, we would expect positive but below average returns.”
President Donald Trump extended the tariff truce with China for another 90 days into November, deferring a hike that was set for Tuesday. In a social media post, Trump suggested there were no planned changes to US trade policy or to the terms of the arrangement between the world’s two largest economies. China also said it would extend its own suspension for 90 days.
“The delay on imposing crippling US tariffs on Chinese goods will be welcome news, especially for American retailers in the run-up to the crucial Christmas season,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown. “It will enable companies to import clothing electronics and toys at a lower tariff rate of 30%, and will provide much needed certainty, at least for the short term, on costs.”
Nvidia Corp. dropped 0.1% after China urged local companies to avoid using the company’s H20 processors, particularly for government-related purposes. Beijing’s intervention complicates an attempt by the chipmaker to recoup billions in lost China revenue and comes after it, along with Advanced Micro Devices Inc., had secured Washington’s approval to resume lower-end AI chip sales to China.
Intel Corp. jumped 1.7% after Trump said members of his cabinet would continue talks with the company’s chief executive officer, Lip-Bu Tan, in the coming days after a meeting on Monday. In a statement, Intel said Tan and Trump had discussed the company’s “commitment to strengthening U.S. technology and manufacturing leadership,” casting the meeting as “candid and constructive.”
A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out some of our webcasts.
Bloomberg News provided this article. For more articles like this please visit
bloomberg.com.
Read more articles by Joel Leon
