Stocks, bonds rise as tame CPI curbs Fed-hike bets: Markets wrap

By Rita Nazareth

(Bloomberg) — An in-line inflation reading spurred gains in both stocks and bonds, easing concern about imminent Federal Reserve interest-rate increases despite elevated oil prices.

The data brought relief to Wall Street traders worried about ongoing geopolitical risks, with the S&P 500 poised to extend this month’s advance. A rally in technology companies also helped sentiment, driving Nasdaq 100 futures up 1%. Treasury two-year yields fell four basis points to 4.18%. Money markets trimmed bets on a September Fed hike.

The consumer price index, excluding often-volatile food and energy categories, increased 0.2% from a month earlier. On an annual basis, it advanced 2.5%, matching the slowest pace since March 2021. Overall, inflation rose 0.1% from the prior month and 3.4% from a year earlier.

In the wake of Friday’s weak July jobs report, the moderation in price growth may help alleviate some of the inflation anxiety at the Fed after three officials dissented on July 29 in favour of raising interest rates.

“The big surprise with a report that had no surprises is that a situation where inflation isn’t reaccelerating, coupled with the most recent, weak jobs report gives the Fed more time to wait,” said Chris Zaccarelli at Northlight Asset Management.

Typically, the market would be buoyed by the thought of rate cuts, but in a world where many are expecting rate hikes, anything that can delay – or squash the need for – rate hikes will be viewed positively, he added.

“Contained core inflation adds to the encouraging signs in last month’s release of a moderation in underlying inflation, helping strengthen the case for a September hold,” said Lindsay Rosner at Goldman Sachs Asset Management.

There will be another round of inflation data before the September Fed meeting, but unless those numbers tell a much different story, officials will likely still be in a position to leave rates unchanged, noted Ellen Zentner at Morgan Stanley Wealth Management.

While prices remain elevated, the latest CPI should give investors greater confidence that peak inflation appears to be behind us, according to Bret Kenwell at eToro. However, a more serious threat would be oil back above $100, reigniting inflation and forcing a more aggressive Fed response.

“With the Strait of Hormuz still shut, upside inflation risks will remain top of mind for the foreseeable future,” said Seema Shah at Principal Asset Management. 

Corporate Highlights:

• Super Micro Computer Inc. gave a revenue forecast for the current quarter that topped analysts’ estimates, a sign the booming AI market continues to bolster sales of the company’s servers.
• CoreWeave Inc., a provider of computing that powers AI systems, topped analysts’ estimates for second-quarter sales after signing up more customers.
• Cava Group Inc.’s sales rose faster than expected as the restaurant chain’s salmon and pita chips drew in diners, showing that Americans are willing to spend when cost and taste converge.
• Nebius Group NV reported a 514% jump in second-quarter sales for its cloud business following strong demand for AI computing power.
• Tencent Holdings Ltd.’s revenue grew a faster-than-projected 11%, keeping up the steady pace of expansion it needs to finance a costly AI services and infrastructure buildout.

What Bloomberg strategists say…

“While wage growth remains a challenge, it’s also because the labor market has been softening. Coupled with data indicating some modest progress on the inflation front, it should be enough to keep front-end yields capped until more visibility on the rate path emerges.”

—Tatiana Darie, Macro Strategist, Markets Live.

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.2% as of 12 p.m. New York time
• The Nasdaq 100 rose 0.7%
• The Dow Jones Industrial Average was little changed
• The Stoxx Europe 600 fell 0.2%
• The MSCI World Index rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1539
• The British pound was little changed at $1.3509
• The Japanese yen was little changed at 159.23 per dollar

Cryptocurrencies

• Bitcoin fell 0.5% to $63,392
• Ether rose 0.6% to $1,891.18

Bonds

• The yield on 10-year Treasuries declined two basis points to 4.67%
• Germany’s 10-year yield was little changed at 3.16%
• Britain’s 10-year yield was little changed at 4.97%
• The yield on 2-year Treasuries declined three basis points to 4.19%
• The yield on 30-year Treasuries was little changed at 5.23%

Commodities

• West Texas Intermediate crude rose 0.2% to $83.33 a barrel
• Spot gold rose 1.2% to $4,420.54 an ounce

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Last modified: August 12, 2026