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Stock Rally Stalls as Bond Yields Fall Before CPI: Markets Wrap

(Bloomberg) — Wall Street refrained from making big bets ahead of key inflation report, with a rally in stocks stalling near record highs. Bonds and the dollar edged up. Gold futures pared losses as Donald Trump said gold imports will not face US tariffs.

With the earnings season almost done, investors are turning to economic data for clues on whether the Federal Reserve will be able cut rates in September. Most shares in the S&P 500 fell. Megacaps were mixed, with Tesla Inc. up and Apple Inc. down. President Trump signaled he’d be open to allowing Nvidia Corp. to sell a scaled-back version of its most advanced AI chip to China.

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The yield on 10-year Treasuries slid two basis points to 4.27%. A dollar gauge rose 0.2%. Bitcoin briefly topped $122,000.

Data due Tuesday is forecast to show US consumers saw a slight pickup in inflation as retailers gradually raised prices on a variety of items subject to higher import duties.

“The market’s reaction to any surprises in the numbers could be exaggerated — especially if a significantly hotter-than-expected CPI print leads traders to believe the Fed may not cut rates at its next meeting,” said Chris Larkin at E*Trade from Morgan Stanley.

The Fed’s two vice chairs, Michelle Bowman and Philip Jefferson, and Dallas Fed President Lorie Logan are under consideration to serve as chair of the central bank when the position opens next year, according to two administration officials. Treasury Secretary Scott Bessent will interview additional candidates in the coming weeks, said the officials.

A survey conducted by 22V Research shows 18% of investors believe that the market reaction to CPI will be “risk-on,” 43% said “mixed” and 39% “risk-off”.

The core consumer price index, regarded as a measure of underlying inflation because it strips out volatile food and energy costs, rose 0.3% in July, according to the median projection in a Bloomberg survey of economists.

“There is no doubt about it, CPI, will not be good tomorrow,” said Andrew Brenner at NatAlliance Securities. “The bigger question is ‘does it matter?’ We think not. Inflation will remain sticky, with potholes, but a weakening employment situation will commandeer the Fed outlook.”

Money markets show traders have priced in more than two rate reductions by December, with an about 80% probability of a quarter-point Fed cut as early as next month.

There’s a 70% chance of further gains in the S&P 500 after the inflation report, according to the JPMorgan Chase & Co. Market Intelligence team led by Andrew Tyler.

They predict the S&P 500 will advance as much as 2% if the data is either in-line or cooler than estimated. A hot report could spark declines of nearly 3%.

“There’s little evidence that tariffs are biting,” said Mark Hackett at Nationwide. “Retail flows remain strong, institutions are hesitant but still buyers, and share repurchase activity is on pace to hit a record.”

He continues to expect a “sideways trend” until a broader reset later this year.

A light print on US CPI data this week could mean small caps and lower quality stocks would “gain more durable footing,” according to Morgan Stanley strategists led by Michael Wilson.

“We think it makes sense for equity investors to stay nimble” around the report.

Meantime, strategists at Citigroup Inc. raised their year-end target for the S&P 500 to 6,600 points from 6,300. Companies have produced “an impressive beat,” while also mostly sticking with their projections for the second-half of the year, the team led by Scott Chronert said.

US companies struck a more positive tone last week on post-earnings conference calls, although there’s still uncertainty around consumer demand and capex, according to RBC Capital Markets strategists led by Lori Calvasina.

“For now, investors are choosing to focus on what they can see in front of them, which is stronger-than-expected earnings growth, a durable AI secular theme, and a still firm economic backdrop,” said Anthony Saglimbene at Ameriprise.

However, Saglimbene said this week’s key inflation data and reads on the consumer could challenge investors’ rather complacent view of the potential risks to growth.

“Yet, until there is more concrete evidence of tariff impacts, investors appear comfortable putting those risks to the side for now,” he noted.

A record share of fund managers see US stocks as too expensive after the sharp rally since April lows, according to a monthly survey by Bank of America Corp. About 91% of participants indicated that US stocks are overvalued, the highest ever proportion in data going back to 2001.

“We think investors already allocated to equities in line with their strategic benchmarks should consider implementing short-term hedges, while those under-allocated can prepare to add exposure on potential market dips,” said Mark Haefele at UBS Global Wealth Management.

Meantime, interest-rate strategists at BofA lowered Treasury yield forecasts in anticipation that recent economic data will drive a shift in the Fed’s assessment of risks.

Strategists led by Mark Cabana cut their year-end forecast for two-year yields to 3.5%, from 3.75% previously. They see 10-year yields at 4.25% by the end of December compared with the previous estimate of 4.5%.

On the geopolitical front, President Trump downplayed expectations for his upcoming meeting with Russian leader Vladimir Putin as he seeks to end the war in Ukraine, casting it as a “feel-out meeting” and saying he would confer with Ukrainian and European leaders after the sitdown.

Trump also said he hopes China will massively step up its purchases of American soybeans, even as China has yet to book any cargoes for the upcoming season.

Corporate Highlights:

Nvidia Corp. and Advanced Micro Devices Inc. have agreed to pay 15% of their revenues from Chinese AI chip sales to the US government in an unusual deal that threatens to set a precedent for American companies doing business in the Asian nation. Intel Corp. Chief Executive officer Lip-Bu Tan was expected to meet with Donald Trump, four days after the US president called for Tan’s resignation, citing conflicts of interest. Micron Technology Inc. raised its fiscal fourth-quarter revenue and earnings outlook, citing “improved pricing” for a key product. The Trump administration released new guidance outlining how states can use federal funds to build electric-car chargers after a federal court blocked an earlier move to freeze the program. C3.ai Inc. tumbled after a steep sales miss the software company attributed to its founder’s health issues. Rumble Inc. is weighing an offer to buy German data center company Northern Data AG in an all-stock deal valuing the target at about $1.17 billion that would boost the conservative video service’s bid to become a cloud-computing provider. Ford Motor Co. unveiled plans for a new line of budget electric vehicles in a $5 billion bid to achieve the mass appeal that has so far eluded its money-losing EV business. General Motors Co. is seeking to lure back some former employees of its defunct Cruise autonomous-vehicle business as part of a renewed push to develop a new driverless car, according to people familiar with the matter. An explosion at United States Steel Corp.’s Clairton Coke Works plant in Pennsylvania on Monday left dozens of workers injured or trapped, according to multiple news reports. Walt Disney Co.’s ESPN and Fox Corp. plan to offer a bundled package that will include both of their new streaming services for $40 a month. Paramount has acquired the exclusive rights to show all events from the Ultimate Fighting Championship in the US over the next seven years, the companies announced Monday, a $7.7 billion deal designed to boost the Paramount+ streaming service. Shares of North American lithium producers soared as investors bet that the suspension of a major Chinese mine would ease a supply glut and likely lead to a rebound in prices. Management of Orsted A/S failed to convince analysts and investors that the company is at a turning point after losing nearly one third of its value from announcing it would sell shares. Barrick Mining Corp. posted a net charge of $1.04 billion related to the seizure of its vast Loulo-Gounkoto gold complex by Mali’s military junta. Electricite de France SA was forced to shut four atomic reactors after a swarm of jellyfish clogged up filter drums at its Gravelines power plant. What Bloomberg Strategists say…

“US stocks no longer look like a one-sided market chasing upside, and any rallies driven by expectations for Federal Reserve support are primed for a sharp unwind if the narrative of a dovish pivot is challenged.”

– Michael Ball, Macro Strategist, Markets Live.

For the full analysis, click here.

Some of the main moves in markets:

Stocks

The S&P 500 was little changed as of 2:06 p.m. New York time The Nasdaq 100 fell 0.1% The Dow Jones Industrial Average fell 0.4% The MSCI World Index fell 0.1% Bloomberg Magnificent 7 Total Return Index rose 0.3% The Russell 2000 Index was little changed Currencies

The Bloomberg Dollar Spot Index rose 0.2% The euro fell 0.3% to $1.1610 The British pound fell 0.2% to $1.3430 The Japanese yen fell 0.2% to 148.02 per dollar Cryptocurrencies

Bitcoin rose 0.8% to $119,329.83 Ether rose 1.4% to $4,275.69 Bonds

The yield on 10-year Treasuries declined two basis points to 4.27% Germany’s 10-year yield was little changed at 2.70% Britain’s 10-year yield declined four basis points to 4.57% The yield on 2-year Treasuries declined one basis point to 3.75% The yield on 30-year Treasuries declined one basis point to 4.84% Commodities

West Texas Intermediate crude rose 0.1% to $63.96 a barrel Spot gold fell 1.2% to $3,357.08 an ounce ©2025 Bloomberg L.P.

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