CPI is in line with expectations
The S&P 500 Index climbed 0.72% today, while the Dow Jones Industrial Average advanced 1.13% and the Nasdaq 100 Index gained 0.64%. September E-mini S&P futures were up 0.63%, and September E-mini Nasdaq futures rose 0.58%.
Equities moved higher after the latest U.S. Consumer Price Index report came in largely in line with forecasts, bolstering expectations for a Federal Reserve rate cut in September. On a year-over-year basis, July’s headline CPI increased 2.7%, a touch softer than anticipated, while core CPI came in at 3.1%, slightly above expectations. Following the report, market-implied odds of a rate cut at the Fed’s September 16–17 meeting jumped to 95%, up from 88% on Monday.
Treasuries reacted mixed to the data. The 2-year T-note yield dropped 3.8 basis points to 3.731% on the CPI news, while the 10-year yield edged up 1.0 basis point after fresh criticism from President Trump toward Fed Chair Jerome Powell. In a Truth Social post, Trump said he is considering authorizing a lawsuit against Powell tied to construction projects at Federal Reserve buildings. Markets took note, with some analysts expressing concern that efforts by the Trump administration to remove Powell could be aimed at forcing interest rates lower, potentially heightening inflation risks.
July’s monthly CPI rose 0.2%, matching market expectations. The annual headline CPI held steady at 2.7%, slightly below the forecast of 2.8%. Core CPI, which excludes food and energy, rose 0.3% for the month, in line with estimates. Year-over-year, core CPI accelerated to 3.1% from June’s 2.9%, just above expectations of 3.0%. Both headline and core CPI remain off the post-Covid lows of 2.3% and 2.8% reached earlier this year.
Separately, President Trump signed an executive order late last night extending the current U.S.–China tariff freeze for another 90 days, pushing the deadline to November 10 to allow more time for trade negotiations — a move that mirrored CNBC’s reporting yesterday. The decision followed an agreement by Nvidia and AMD to pay the U.S. government 15% of revenues from certain lower-powered AI chips sold to China in exchange for export licenses. However, Bloomberg reported today that Beijing has instructed Chinese firms, particularly in government-related sectors, to avoid using Nvidia’s H20 processors.