The inflation report is great news for the prospect of a rate cut
US stocks edged higher on Thursday after the June consumer price index report showed inflation cooled more than anticipated last month.
The S&P 500 and Nasdaq hovered near record highs. The 10-year Treasury yield dropped nine basis points to 4.181%, while the two-year note fell 14 basis points to 4.49%.
Last month, CPI rose 3% on an annual basis versus expectations of 3.%. Month-over-month, CPI declined 0.1%, on expectations for a 0.1% rise.
A drop in gas prices helped the broader reading, and high housing costs also showed signs of easing, recording their slowest rate of growth since 2022.
The reading should help pave the way for the Federal Reserve to start cutting interest rates. Odds of a cut at this month’s policy meeting edged slightly higher after the CPI report dropped, though the strongest odds are still for a September cut. According to the CME FedWatch Tool, investors see about an 80% chance of a rate cut in September, with odds growing for another cut at either the November or December meeting.
“The latest inflation numbers put us firmly on the path for a September Fed rate cut,” Seema Shah, chief global Strategist at Principal Asset Management, said. “The smallest gain in core CPI since 2021 surely gives the Fed confidence that Q1’s hot CPI readings were a bump in the road, and builds momentum for multiple rate cuts this year.”
Here’s where US indexes stood shortly after the 9:30 a.m. opening bell on Wednesday:
- S&P 500: 5,640.36, up 0.1%
- Dow Jones Industrial Average: 39,789.77, up 0.2% (68 points)
- Nasdaq composite: 18,646.76, unchanged
Here’s what else happened today:
- Congress is taking another shot at banning members and their families from trading stocks.
- Here’s what a Trump win would do for the stock market, according to Goldman Sachs.
- Credit markets are too risky and too vulnerable to shocks to be worth it for investors right now, PIMCO said
In commodities, bonds, and crypto:
- Oil futures were higher. West Texas Intermediate crude rose 0.2% to $82.30 a barrel.
- Brent crude, the international benchmark, increased 0.2% to $85.26 a barrel.
- Gold rose 1.3% to $2,411 per ounce.
- The 10-year Treasury yield fell nine basis points to 4.181%.
- Bitcoin climbed 1.3% to $58,014.
