S&P 500 Wipes Out Rally as September Fed Bets Wane: Markets Wrap

This content was published on July 15, 2025 - 22:06

8 minutes

(Bloomberg) — Relatively tame inflation data failed to ease Wall Street’s worries about the impacts of tariffs, with initial rallies in stocks and bonds sputtering on bets the Federal Reserve will keep rates on hold for now. Tech shares jumped on news Nvidia Corp. and Advanced Micro Devices Inc. will resume some chip sales to China, with traders also parsing results from banks.

The S&P 500 retreated after earlier topping 6,300. A gauge of US financial giants sank as Wells Fargo & Co. cut its guidance for net interest income. JPMorgan Chase & Co. dropped even as investment bankers eked out a surprise gain. Citigroup Inc. hit the highest since 2008 on a stock-buyback plan. While short-dated Treasuries led losses, longer maturities also slid – with 30-year yields topping 5%. The dollar rose 0.4%.

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Underlying US inflation rose by less than expected for a fifth month in June even as the details signaled companies are beginning to more meaningfully pass some tariff-related costs to consumers. Traders priced in somewhat lower odds that the Fed will cut rates more than once this year, and the probability of a move in September is now seen as only slightly higher than 50%.

“The big question for the inflation picture is tariffs. It’s taking some time for tariffs to show up in the data, but it’s highly likely that a tariff-driven inflation reckoning is coming,” said Skyler Weinand at Regan Capital. “The Fed will want to watch the next several inflation and jobs reports before it makes any moves on rates.”

Treasury Secretary Scott Bessent suggested that Fed Chair Jerome Powell should step down from the board when his term is up in May 2026. Asked whether President Donald Trump has asked Bessent himself to serve as Fed chair, the Treasury chief said, “I am part of the decision-making process.” He noted that “it’s President Trump’s decision, and it will move at his speed.”

US PREVIEW: PPI Components to Keep Core PCE Firmer Than CPI

The consumer price index, excluding the often volatile food and energy categories, increased 0.2% from May. While a decline in car prices helped keep a lid on the figure, goods categories exposed to Trump’s levies including toys and appliances rose at the fastest paces in years.

To Ellen Zentner at Morgan Stanley Wealth Management, inflation has begun to show the first signs of tariff pass-through. While services inflation continues to moderate, the acceleration in tariff-exposed goods is likely the first of greater price pressures to come, she said.

“While any tariff-induced boost to inflation is likely to be short-lived, with higher tariffs being announced, it would be wise for the Fed to remain on the sidelines for a few more months at least,” said Seema Shah at Principal Asset Management.

At Goldman Sachs Asset Management, Kay Haigh notes that while underlying inflation remained muted, price pressures are expected to strengthen — and the July and August CPI reports will be important hurdles to clear.

“For the time being, the Fed remains in wait-and-see mode,” Haigh said. “Should underlying inflation, however, continue to prove benign the path remains open to a resumption of the Fed’s easing cycle in the autumn.”

Traders this month have whittled the odds of Fed easing. Strong June employment data released July 3 led them to rule out a cut after the next meeting concludes July 30 and to downgrade the chances of a September cut, which was fully priced in as recently as late June.

Given recent trade policy developments, the Fed will likely look to stay patient as inflation impacts continue to materialize, according to Oscar Munoz and Gennadiy Goldberg at TD Securities.

“Today’s report showed the beginning of the tariff passthrough into core goods inflation, and as long as the labor market remains strong, the Fed can afford to wait and see how inflation and inflation expectations evolve over the summer,” they said.

To Tiffany Wilding at Pacific Investment Management Co., despite a firmer core CPI in June relative to May, Fed officials will likely welcome this report – higher tariff related goods inflation justifies their more cautious stance, while continued disinflation across services categories should support rate cuts in September and beyond.

“We believe the fact that inflation is more concentrated in core goods categories will make it easier for the Fed to communicate why they are cutting rates while inflation is above target,” she noted.

“If you believe the economy is hobbling along, then you have a case for thinking price pressures will disappear soon,” said Callie Cox at Ritholtz Wealth Management. “But for now, they’re here, and curious minds may start wandering down the rabbit hole of how far inflation could go.”

Cox says the next few weeks could shift these summer markets into a higher gear.

“It’s time for the bulls to bring the receipts before we settle in for another sleepy August,” she said. “Eventually, we need to see fundamentals back up these prices. I’m interested to see if the data can get us there.”

Fund managers have rushed back into risky assets at a record pace on optimism over economic growth and strong corporate profits, according to a monthly survey by Bank of America Corp. The share of investors taking a higher-than-normal risk level in their portfolios registered the biggest increase over a three-month span going back to 2001, the poll showed.

BofA strategist Michael Hartnett said that he doesn’t expect a big pullback in stocks over the summer, adding that exposure to equities is not yet “extreme” and bond volatility is still low.

Corporate Highlights:

Apple Inc. has struck a $500 million deal to buy rare-earth minerals from MP Materials Corp., the US producer that just last week secured backing from the Pentagon.
Tesla Inc. opened its first India showroom, showcasing Model Y cars with a starting price of nearly $70,000, as Elon Musk’s electric-vehicle maker looks to tap new markets and offset slowing sales where it’s already well established.
Air taxi startup Joby Aviation Inc. plans to double aircraft output capacity at its main production site in California, just weeks after completing piloted test flights in Dubai.
CoreWeave Inc., a provider of AI computing power to companies including OpenAI Inc. and Microsoft Corp., said it plans to invest as much as $6 billion to set up a data center in Lancaster, Pennsylvania, as the firm expands its capacity across the US.
BlackRock Inc.’s revenue and performance fees missed estimates, even as the world’s largest money manager hit a record $12.5 trillion in assets.
Bank of New York Mellon Corp.’s second-quarter profit surpassed analyst expectations as the bank continued to reinvest maturing securities at higher yields, fueling a 9% increase in revenue.
Uber Technologies Inc. and Baidu Inc. plan to launch robotaxis on the ride-sharing platform in several markets outside of the US and mainland China through a multiyear partnership.
Georgia regulators approved a plan that opens the door for Southern Co. to boost spending by as much as $15 billion to deliver a projected surge of electricity for data centers, new factories and electric vehicles.
Albertsons Cos. raised its sales forecast for the full year, but left its earnings outlook unchanged amid pressure on margins.

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