Stocks Rise Again as Softer Producer Inflation Reduces Fed Tightening Pressure – US Market Wrap

Another softer-than-expected inflation report lifted stocks and bonds as investors further reduced expectations for Federal Reserve interest-rate increases this year.

The muted impact of the Iran conflict on inflation reinforced the view that the Fed has room to remain patient before considering any policy tightening. While money markets still expect one rate hike this year, it is now fully priced for December rather than earlier in the year. Short-dated Treasuries led gains, the S&P 500 advanced for a second consecutive session, and the dollar weakened. Semiconductor stocks lagged, with a key chipmaker index falling 2.1%.

A decline in energy costs helped contain inflation pressures in the latest producer price data. Core producer prices rose 4.7% from a year earlier, below economists’ expectations.

Geopolitical risks remained elevated despite the encouraging inflation data. The conflict in the Persian Gulf intensified after the US launched additional airstrikes on Iran, with Trump pledging to continue military action until Tehran stops targeting ships in the Strait of Hormuz and agrees to reopen the vital shipping route.