Wall St set for strong open as inflation cools in June

Wall Street Futures Surge as June Inflation Cools, Hinting at Fed’s Monetary Tightening Cycle

Investor optimism soared as recent data revealed a further decrease in inflation in June. This development has led to increased belief that the Federal Reserve is nearing the conclusion of its monetary tightening cycle.

In the United States, consumer prices experienced a modest rise in June, marking the smallest yearly increase in over two years. Inflation continues to subside, as evidenced by the data from the highly anticipated U.S. Labor Department report.

The report indicated that core consumer prices, which exclude food and energy, grew by 4.8% in June, down from 5.3% in May on an annual basis. Economists had predicted a 5% increase, making the actual result a positive surprise.

When observed over a 12-month period ending in June, consumer prices (CPI) advanced 3.0%. This represents the smallest year-on-year increase since March 2021, following a 4.0% rise in May.

Market participants have adjusted their predictions accordingly, with a 26% probability for the central bank to increase short-term borrowing costs by 25 basis points in November, compared to the previous 34% probability prior to the data release.

Despite this adjustment, the majority of traders still anticipate the Fed to raise the benchmark rate within the range of 5.25% to 5.5% later this month.

Art Hogan, Chief Market Strategist at B Riley Wealth, commented, “The CPI report has come in lighter-than-expected both on the headline and on the core, and the markets are reacting in a positive fashion to that report… Its policy implications are clear, the Fed is at or near the end of this rate hike cycle.”

As of 8:43 a.m. ET, Dow e-minis saw a surge of 197 points, or 0.57%, S&P 500 e-minis were up by 33.75 points, or 0.75%, and Nasdaq 100 e-minis increased by 153.75 points, or 1.01%.

Megacap growth and technology stocks, such as Microsoft, Amazon.com, and Tesla, experienced gains ranging from 0.9% to 2.4% during premarket trading.

The CBOE Market Volatility Index hit a one-week low at 14.06.

Following the release of the data, the two-year and 10-year Treasury yields continued to decline.

Investors will closely monitor the remarks made by several Fed officials throughout the day, including Minneapolis Fed President Neel Kashkari, who holds voting power this year.

Later this week, attention will shift to the second-quarter earnings season, with Wall Street lenders expected to report higher profits due to rising interest payments offsetting a reduction in dealmaking. – Reuters