Wall Street Roars as CPI Data Meets Expectations

The latest CPI data has reignited hopes for a Federal Reserve rate cut in September, sending US stocks soaring. On Tuesday, the S&P 500 and Nasdaq Composite both closed at record highs, with gains of 1.1% and 1.4%, respectively. The Dow Jones Industrial Average mirrored the bullish sentiment, climbing 1.1%.

According to Investing.com, the July CPI data showed a 0.2% month-over-month increase, matching June’s figures and aligning with economists' forecasts. Year-over-year inflation held steady at 2.7%, slightly below expectations of 2.8%. Core CPI, which excludes volatile food and energy prices, rose 0.3% monthly and 3.1% annually—marginally higher than anticipated.

"This gives the Fed the room to respond to the weaker jobs backdrop and cut interest rates from September," ING analysts noted.

Market Reactions and Fed Speculations

The tempered CPI data has reinforced expectations that the Fed will pivot toward monetary easing. Futures markets reacted positively, with S&P 500 Futures edging up 0.2% and Nasdaq 100 Futures surging 0.8%. The Dow Jones Futures, however, remained flat.

Investors are now looking ahead to Thursday’s producer price index (PPI) report and Friday’s retail sales data for further clues on the economy’s trajectory. The Fed’s next move remains a focal point, especially after last week’s softer jobs report.

• S&P 500 Futures: +0.2% to 6,409.50
• Nasdaq 100 Futures: +0.8% to 23,835.75
• Dow Jones Futures: Unchanged at 44,551.0

Tech Stocks Lead the Charge

Tech giants were among the biggest beneficiaries of the CPI data-driven rally. Intel (INTC) surged 5.6% after CEO Lip-Bu Tan met with former President Trump, easing tensions over national security concerns. Alphabet (GOOGL) also gained over 1% following reports that AI startup Perplexity made a $34.5 billion bid for Google’s Chrome browser.

Meanwhile, crypto firm Circle (CRCL) climbed 1.3% after posting better-than-expected quarterly results in its debut as a public company. The strong performance underscores how investor sentiment is being buoyed by easing inflation fears.

Is Intel Really Undervalued?

With Intel’s recent surge, questions arise about its true valuation. While the stock has rebounded, some analysts argue that other tech stocks may offer greater upside. InvestingPro’s AI analysis suggests that INTC isn’t the most undervalued player in the sector, despite its recent momentum.

The broader market’s rally, fueled by the CPI data, highlights how inflation trends remain a critical driver of equity movements. As long as price pressures stay subdued, the Fed’s path to rate cuts could keep the bull market alive.

What’s Next for Investors?

With key economic reports on the horizon, traders will be watching for confirmation that inflation is indeed under control. If the PPI and retail sales data align with the CPI data, September rate cuts could become a near certainty.

1. Thursday: Producer Price Index (PPI) Release
2. Friday: Retail Sales and Consumer Sentiment Data

For now, the market’s optimism seems justified—but as always, the Fed’s next move will dictate whether this rally has staying power.