Investors in the U.S. stock market are facing a period of uncertainty as inflation shows signs of cooling. Despite softer-than-expected inflation readings for June, concerns about growth cooling persist. The Consumer Price Index (CPI) grew at a slower rate than anticipated, with headline CPI increasing by 3% year-on-year and core CPI growing by 3.3%.
As a result of the subdued inflation data, investors have started to speculate that the Federal Reserve will begin cutting interest rates as early as September. This speculation has led to a sharp increase in the likelihood of a rate cut, with over an 85% chance of a 25 basis points rate cut in September, according to CME Fedwatch.
Despite the optimism surrounding potential interest rate cuts, the tech sector experienced significant losses, leading to a retreat from record highs on Wall Street. This pullback was driven by profit-taking in technology shares, particularly in companies like NVIDIA Corporation and Tesla Inc. The delay in Tesla’s autonomous taxi unveiling added to the negative sentiment, causing a drop in stock prices.
On Thursday, the S&P 500 fell by 0.9% to close at 5,584.54 points, while the NASDAQ Composite slid by 1.9% to 18,288.62 points. In contrast, the Dow Jones Industrial Average rose slightly by 0.1% to 39,753.75 points. The overall market sentiment was influenced by concerns over cooling growth and the impact of potential interest rate cuts.
With market focus shifting to the second quarter earnings season, investors are eagerly awaiting key bank earnings reports from JPMorgan Chase & Co, Wells Fargo & Company, Citigroup Inc, and Bank of New York Mellon. These reports are expected to provide insights into the health of the economy in the second quarter and may help guide future investment decisions.
The impact of inflation on U.S. stock index futures has led to a period of uncertainty and profit-taking on Wall Street. The tech sector, which had driven a recent stock rally, experienced significant losses, contributing to the overall market decline. As investors await the second quarter earnings reports, the focus remains on how the economy will respond to changing inflation dynamics and potential interest rate cuts.