The data was the first notable sign of relief for Americanswhich have seen inflation rise steadily in the last two years.
Specifically, consumer prices in the United States did not increase in July compared to Junewhich represents the lowest monthly inflation in more than two years, thanks to lower fuel prices.
The market is now pricing in a 37.5% chance that fed funds rates will rise 75 basis points. at the next US Federal Reserve meeting in September, down from 67.5% before the data.
All 11 major S&P 500 sectors advanced in early trading, with consumer discretionary, information technology and communication services gaining 1.7% to 2.6%.
“It’s quite a surprise and that’s why the market is reacting so positively. Is that a strong indication that inflation is coming down? It’s too early to make that claim. On the other hand, assuming this data is not revised, it’s certainly good news for the economy,” said Tim Ghriskey of Ingalls & Snyder in New York.
“The signal of a slowing rate of inflation offers hope that the Fed’s rate hikes may not have to go as far as previously thought,” said Mike Owens, global sales trader at Saxo Markets.
After a rough start to the year, The benchmark S&P 500 index is up nearly 15% from its mid-June low, largely on expectations the Federal Reserve will be less aggressive than anticipated in its efforts to bring the economy to a soft landing.
High-growth tech stocks, whose valuations are vulnerable to rising bond yields, rose as Treasury yields fell sharply across the board. Apple Inc, Alphabet Inc and Amazon.com Inc advanced more than 2% and 3%, respectively.
“Rising real yields, due to the Fed’s commitment to fight inflation, have been a huge problem for valuations in 2022, so any inclination to ease monetary policy is seen as positive by the stock market. particularly for higher value companies,” said Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson Investors.
Source: Ambito
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