(Bloomberg) — The stock market saw gains following a US inflation report that met expectations, maintaining the belief that the Federal Reserve will begin cutting rates in September.
The S&P 500 was on track for its fifth consecutive day of increases, marking the longest winning streak in over a month. Financial and tech stocks led the way, with most major groups advancing. Treasury yields saw minimal changes, while the dollar was set to reach its lowest point since March.
The consumer price index data supported the ongoing trend of disinflation, bringing some relief to markets still recovering from last week’s turmoil. With a softening job market, it is widely anticipated that the Fed will lower interest rates next month, with the exact size of the cut dependent on forthcoming data.
Chris Larkin of E*Trade at Morgan Stanley commented, “Today’s as-expected CPI likely will not rock the boat. Now the primary question is whether the Fed will cut rates by 25 or 50 basis points next month.”
At Evercore, Krishna Guha noted that the July CPI, while not perfect, aligns with the Fed’s preferred inflation measure. The central bank is now focusing more on labor market data to determine the extent of rate cuts.
The S&P 500 remained near 5,460, with the VIX fear gauge continuing to decline. Treasury 10-year yields dropped slightly to 3.82%.
The latest CPI report was seen as giving the Fed the green light to begin rate cuts in September, according to strategists at TD Securities.
Florian Ielpo at Lombard Odier Investment Managers stated, “It offers little new information to guide the future decisions of the Fed, aside from potentially supporting a rate cut due to job market concerns.”
Chris Zaccarelli of Independent Advisor Alliance viewed the July CPI report as confirmation that the Fed should proceed with interest rate cuts.
Seema Shah of Principal Asset Management believes the CPI data removes any remaining obstacles to the Fed starting the rate cutting cycle in September.
Corporate highlights included UBS Group AG posting higher-than-expected profits, Southwest Airlines Co. showing confidence in its leadership team, Alaska Air Group Inc. and Hawaiian Holdings Inc. extending their deal closing, Mars Inc. acquiring Kellanova, and Blackstone Inc. in talks to buy Chartis Group.
Key events to watch this week include China home prices and retail sales, US initial jobless claims and retail sales, and speeches from Fed officials.
Market movements:
Stocks:
- The S&P 500 rose 0.5%
- The Nasdaq 100 rose 0.4%
- The Dow Jones Industrial Average rose 0.7%
- The MSCI World Index rose 0.6%
- Bloomberg Magnificent 7 Total Return Index fell 0.2%
- The Russell 2000 Index fell 0.2%
Currencies:
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.3% to $1.1021
- The British pound fell 0.1% to $1.2848
- The Japanese yen was little changed at 146.92 per dollar
Cryptocurrencies:
- Bitcoin fell 1.9% to $59,443.51
- Ether fell 1.2% to $2,666.68
Bonds:
- The yield on 10-year Treasuries declined two basis points to 3.82%
- Germany’s 10-year yield was little changed at 2.18%
- Britain’s 10-year yield declined six basis points to 3.82%
Commodities:
- West Texas Intermediate crude fell 0.9% to $77.65 a barrel
- Spot gold fell 0.8% to $2,445.13 an ounce
This article was created with the help of Bloomberg Automation.
–With assistance from John Viljoen and Sujata Rao.
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