Stocks, Bonds Rise as Soft CPI Curbs Fed-Hike Bets: Markets Wrap
(Bloomberg) — A cooler-than-estimated inflation reading spurred gains in both stocks and bonds, easing concern about imminent Federal Reserve interest-rate hikes amid a resurgence in oil prices.
The data brought some relief to Wall Street traders worried about a flare-up in geopolitical threats, with the S&P 500 extending this month’s advance. At the start of the earnings season, big banks posted solid results. A rally in chipmakers also helped sentiment, driving the Nasdaq 100 up 1.3%. That’s even as International Business Machines Corp. sank 25% on a sales miss.
Short-dated Treasuries outperformed as money markets trimmed bets on a July Fed increase. US crude briefly erased its rally after President Donald Trump backed away from a plan to impose a fee on Strait of Hormuz shipments.
Consumer prices dropped in June for the first time in six years and a key gauge of underlying inflation was little changed. Fed officials will likely welcome the data ahead of their upcoming meeting even as hostilities in the Persian Gulf risk prolonging the fallout from the conflict.
“The Fed was losing patience with high inflation readings, and today’s cooler-than-expected report gives them room to breathe,” said Ellen Zentner at Morgan Stanley Wealth Management. “By surprising on the downside, it relieves immediate pressure for action.”
In testimony before US lawmakers, Fed Chairman Kevin Warsh said central bank officials have no tolerance for high inflation, reiterating a vow to tame price growth.
“Elevated inflation, strong employment, and a surprisingly hawkish Fed lead us to believe that a hike is to be expected at some point in the next six months,” said Skyler Weinand at Regan Capital. “The Fed will have its finger on the rate hike trigger, which it will pull at the next sign of elevated inflation.”
The well-behaved CPI print likely lowers pressure on the Fed to hike soon, but renewed hostilities in Iran mean the prospect of hikes is far from over, noted Kay Haigh at Goldman Sachs Asset Management. “Although a path remains for rates to stay unchanged this year, the re-escalation of the conflict has narrowed it,” he said.
Investors will likely feel more confident that inflation has peaked, easing concerns that the Fed will be forced to raise rates later this month, but this is not an all-or-none situation, according to Bret Kenwell at eToro.
“A softer CPI print does not guarantee the Fed will remain on hold, much less put rate cuts back on the table, particularly with inflation still above target and oil prices rebounding amid renewed geopolitical turmoil,” he said. “While inflation has cooled, it has not disappeared.”
Corporate Highlights:
JPMorgan Chase & Co. reported its highest quarterly profit ever as stock traders blew past analysts’ estimates and a long-held Visa Inc. stake paid off to the tune of $4.6 billion. Goldman Sachs Group Inc. trounced its own Wall Street stock-trading records, posting $7.42 billion for a quarter that saw indexes rip higher and ongoing market volatility around artificial intelligence and war in the Middle East. Bank of America Corp.’s stock traders notched a record during the second quarter, benefiting from market volatility, while its investment bankers capitalized on a dealmaking resurgence. Wells Fargo & Co. reported second-quarter earnings that beat estimates on higher fees from wealth management and investment banking. Citigroup Inc. plans to spend more on technology and AI that could help it whittle down headcount in the second half of the year. The bank reported earnings that beat expectations in key business lines. What Bloomberg Strategists say…
“CPI came in softer than forecasted, taking the attention of the two main macro pressures that had dominated the tape over the last week — higher oil prices and a rising probability of a July Fed hike — and shifting the focus back to the micro in individual earnings.”
—Michael Ball, Macro Strategist, Markets Live. For the full analysis, click here.
Some of the main moves in markets:
Stocks
The S&P 500 rose 0.4% as of 1:08 p.m. New York time The Nasdaq 100 rose 1.3% The Dow Jones Industrial Average fell 0.1% The MSCI World Index rose 0.4% Currencies
The Bloomberg Dollar Spot Index fell 0.4% The euro rose 0.4% to $1.1427 The British pound rose 0.2% to $1.3381 The Japanese yen rose 0.2% to 162.18 per dollar Cryptocurrencies
Bitcoin rose 3.9% to $64,556.63 Ether rose 5.6% to $1,865.51 Bonds
The yield on 10-year Treasuries declined four basis points to 4.58% Germany’s 10-year yield was little changed at 3.11% Britain’s 10-year yield was little changed at 4.98% Commodities
West Texas Intermediate crude rose 1.3% to $79.12 a barrel Spot gold rose 1.4% to $4,058.60 an ounce ©2026 Bloomberg L.P.
