U.S. Stock Market Rallies on Cooling Inflation; June CPI Posts Biggest Monthly Decline in Six Years
U.S. stock markets rose on news that inflation eased in June with the largest monthly decline in six years, while the Fed Chair Kevin Warsh prepares congressional testimony amid debate over interest rate policy. The S&P 500 closed up 0.38% as investors digested softer-than-expected price pressures.
Inflation Data Sparks Market Rally
Prices fell 0.4% month over month and rose 3.5% year over year in June, according to the latest Consumer Price Index (CPI) survey, while Core CPI — which excludes food and energy costs — remained flat at 0.0% monthly and rose 2.6% yearly. Inflation saw the biggest monthly decline in six years, according to Wall Street commentary.
The S&P 500 closed higher on Tuesday, boosted by semiconductor stocks, after June inflation data came in weaker than expected, with the broad market index finished up 0.38% at 7,543.59, while the Nasdaq Composite advanced 0.9% to end the day at 26,107.01. Semiconductor stocks rebounded after a sell-off in the previous session, with the VanEck Semiconductor ETF (SMH) trading 2.5% higher.
Fed Chair Warsh Testifies on Monetary Policy
House Financial Services Committee Chairman Rep. French Hill (R-Ark.) said lawmakers are likely to press Federal Reserve Chair Kevin Warsh on price stability, past policy missteps and the Fed's expanded balance sheet, with Warsh providing debut testimony to the committee on the outlook for the U.S. economy later Wednesday. The central bank has been embroiled in what Fed Chairman Kevin Warsh called a "family fight," debating whether the central bank will tighten policy or leave rates where they are later this year, with markets last pricing in a quarter percentage point hike coming as soon as the September meeting.
Sector Performance and Market Breadth
Shares of International Business Machines weighed on the 30-stock index, with the stock down 25% after the company warned second-quarter profits will be lower than expected due to soft demand in its software and infrastructure businesses. Price stability remains a major concern for the Fed, with inflation "significantly elevated" at over 2%.
Global Economic Backdrop
China exports in June rose 27% from a year earlier in U.S. dollar terms, the strongest since October 2021, customs data showed Tuesday, quickening from the 19.4% gain in May and sharply beat economists' estimates for a 18.2% growth. Singapore's economy expanded 5.7% in the second quarter, topping market expectations, on the back of strong growth in the manufacturing sector.