Wall Street Nears Records on Inflation Data and Rate Cut Hopes

Wall Street moved closer to record highs Tuesday after new data showed US inflation was slightly better than economists expected. The softer reading boosted expectations that the Federal Reserve may cut interest rates as early as September.

The S&P 500 rose 0.6%, aiming to surpass its record from two weeks ago. The Dow Jones Industrial Average gained 251 points, or 0.6%, while the Nasdaq composite climbed 0.7% toward its own all-time high.

Inflation Data Lifts Rate Cut Expectations

The latest report showed consumer prices in July were 2.7% higher than a year ago, unchanged from June but just below the forecast of 2.8%. Core inflation, which strips out food and energy, rose to its highest level since early this year.

Traders are now betting on a 94% chance the Fed will cut rates in September, up from 86% a day earlier, according to CME Group. The central bank will see one more inflation report and a final jobs report before its September 17 meeting.

Fed’s Balancing Act

Lower interest rates make borrowing cheaper for households and businesses, boosting economic activity and asset prices. However, Fed officials have been cautious, concerned that President Donald Trump’s tariffs could reignite inflation.

Some economists warn the path ahead is uncertain. Brian Jacobsen of Annex Wealth Management noted that tariffs can impact prices over time, making the Fed’s decisions more complex.

Market Movers

On Wall Street, Intel gained 1.5% after Trump praised CEO Lip-Bu Tan, despite calling for his resignation last week. Cardinal Health tumbled 12.4% after reporting revenue below forecasts, despite better-than-expected profits. Analysts noted high investor expectations after the stock had already jumped 33% this year.

Critics caution that the US stock market looks expensive after rallying since April, putting pressure on companies to deliver strong earnings growth.

Global Markets React

Global markets saw mixed moves. China’s indexes inched higher after Trump extended a 90-day pause on new tariffs, a step that could pave the way for a trade agreement. Japan’s Nikkei 225 surged 2.1%, while South Korea’s Kospi slipped 0.5%.

In the bond market, the 10-year Treasury yield rose to 4.29% from 4.27%. The 2-year yield, closely tied to Fed policy expectations, edged down to 3.75% from 3.76%.

SOURCE: AP News