US CPI Secures A Fed Rate Cut? – US Market Wrap

Stocks rose after an in-line US inflation report did little to alter bets the Federal Reserve will start cutting rates in September.

The S&P 500 extended its advance into a fifth straight day, the longest winning streak in more than month. Most of its major groups gained, with financial, energy and tech shares leading the charge. Treasuries saw small moves. The dollar remained at a four-month low.

The S&P 500 remained near 5,455. Megacaps were mixed, with Nvidia rising and Alphabet declining. The VIX continued to fall, reaching about 16. That follows an exceptional rise that sent the gauge above 65 last week.

The consumer price index supported the trend of disinflation and provided some solace to markets still hurting from last week’s collapse. Combined with a deteriorating labour market, the Fed is widely expected to begin decreasing rates next month, with the extent of the decrease likely dictated by incoming data.

Treasury 10-year yields fell one basis point to 3.83%. Swap traders are pricing in less than 35 basis points of Fed easing in September. Traders are still pricing in just over 1 percentage point worth of rate reductions in 2024, with three Fed policy meetings remaining this year. In recent sessions, market pricing had shown a split on the outcome of either 25 or 50 basis points worth of rate reductions next month.