Stocks and Bonds Rise as Softer Inflation Eases Rate-Hike Fears – US Market Wrap

A cooler-than-expected US inflation report lifted both stocks and bonds, easing concerns that the Federal Reserve may need to raise interest rates in the near term despite renewed strength in oil prices.

The softer data provided relief for investors navigating ongoing geopolitical tensions, helping the S&P 500 extend its gains for the month. Financial stocks got earnings season off to a solid start, while a rally in semiconductor shares pushed the Nasdaq 100 up 1.1%. IBM was a notable laggard, falling 25% after missing revenue expectations.

Short-dated Treasuries outperformed as traders scaled back expectations for a July rate hike. The dollar weakened, while US crude oil rose but finished below $80 a barrel after President Donald Trump abandoned plans to impose a fee on shipments through the Strait of Hormuz.

Consumer prices fell in June for the first time in six years, while a key measure of underlying inflation was little changed. The report is likely to be welcomed by Federal Reserve policymakers ahead of their next meeting, although ongoing tensions in the Persian Gulf continue to pose upside risks to inflation through higher energy prices.