Stock Market ends the day with optimism, driven by anticipation for potential Fed interest rate reductions
July 2022 Market Recap: CPI Data Fails to Spur Fed Rate Cut Expectations
In the financial landscape of July 2022, the Consumer Price Index (CPI) release did not align with expectations for a Federal Reserve (Fed) interest rate cut in September. Instead, the data indicated persistent inflationary pressures that likely discouraged rate cuts.
The CPI data showed continued inflation growth, with monthly increases and core inflation (excluding food and energy) remaining elevated. Economists and market participants generally viewed the July CPI data as "hot," meaning inflation was still above targets, and thus it was unlikely to prompt the Federal Reserve to ease monetary policy via rate cuts that soon. Instead, the Fed was expected to maintain or even increase rates to combat inflation.
While the CPI eased to a modest 0.2% increase in July, according to the consensus of forecasts made by MarketWatch, this contrasted with the inflation environment and expectations in 2022, which was much more elevated and did not support early easing.
Meanwhile, Wall Street closed lower, showing caution, while the S&P 500 index reached a new high of 6,445.76 points. The Dow Jones Industrial Average index advanced 1.10%, and the Nasdaq index reached a new high of 21,668.19 points.
In the corporate sector, Intel, a U.S. semiconductor and processor company, experienced a 6.62% increase, reaching $21.81, following a meeting between its new CEO and U.S. President Donald Trump. Trump praised the "incredible success" of Intel's CEO on his Truth Social network.
Circle, the creator of the USDC cryptocurrency, saw a 1.27% increase, reaching $163.21, after reporting revenue above expectations.
Looking ahead, the producer price index (PPI) and retail sales are yet to be released this week. The cost of petroleum dropped by 9.5% last month.
In summary, in July 2022, CPI releases reflected inflationary pressures that led the market and Fed to anticipate continued tightening rather than interest rate cuts by September 2022. The moderate inflation figures and conversations about potential rate cuts pertain to more recent data, not 2022.
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