Inflation Data Sparked a Recovery Mood
The US S&P 500 broad market barometer continued to crawl out of the underground area when the price twice touched the levels below 5,200 points during the previous week. The crowd climbed a 5,400 wall just the day before and then edged to nearly 5,450 on today's consumer prices (CPI) data. The further growth still looks slower and erratic as the US July CPI was actually low but unsurprising. And so, this is a natural action after the sudden fright, even though recession signs seem to have receded. As expected, expert opinions began to vie with each other that it is premature to talk about the economy slipping into recession, as the process should be characterized by a persisting decline in consumption, which has not been noticed or confirmed yet. Meanwhile, inflation pressure scaled back to support optimistic scenarios for the Federal Reserve's rate cut this autumn.
The US CPI rose by 2.9%, as of the latest governmental release to slightly moderate the pace vs 3.0% one month ago, while the polls projected the number would be kept intact at 3.0%. Better than nothing, even taking into consideration that prices added another 0.2% MoM, both in the headline and underlying inflation slices, compared to falling/rising within 0.1% in mid-summer. The so-called "core" CPI also came out at 3.2% in the twelve months to July, which was below average forecasts of 3.3%. The PPI (producer price index) release on Tuesday showed the "core" inflation was cooling as the PPI, excluding most unstable food and energy components, was flat on the month and narrowed the annual indications to 2.4% from a widely estimated range of 2.5% to 2.7%. This means a rate reduction cycle is just around the corner, which may contribute to the recovery mood.
Immediate price increases need not necessarily to take place on Wall Street, yet step-by-step climbing on the path to the top with buying dips on the tech segment bellwethers, and more selectively on broader markets as well, are most likely. More or less risky developments, including a retest of 5,250 to 5,300 on the S&P 500, cannot be excluded. However, appearing at new market lows of August in the AI-related or most consumer stocks is not highly plausible anymore.
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