- Stocks rose on Tuesday after the Producer Price Index (PPI) for July showed wholesale price growth came in below expectations.
- Compared to the previous month, it increased by 0.1%, beating the forecast of 0.2%.
- Investors are now preparing for the Consumer Price Index release on Wednesday.
U.S. stocks rose on Tuesday after the July producer price index showed wholesale price growth was weaker than expected.
According to data from the Bureau of Labor Statistics, the producer price index rose 0.1% last month, compared with an expected 0.2% increase. On a year-over-year basis, the producer price index rose 2.3%, down sharply from 2.7% in June.
The lower-than-expected reading should boost optimism that the consumer price index will show a decline in inflation when it is released on Wednesday.
That leaves open the possibility that the Fed, which has kept interest rates steady for the past year, will ease monetary policy at its next meeting. A big 50-basis-point cut at the September Federal Open Market Committee meeting is slightly more likely than a smaller, more common 25-basis-point cut. CME FedWatchTools.
“This morning’s Producer Price Index (PPI) data generally came in below expectations, which is good news for investors who were concerned that lingering inflation would force the Fed to be more cautious in cutting rates,” Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said Tuesday.
“If tomorrow’s CPI report comes in below expectations, as did this morning’s PPI report, then a 50 basis point cut in rates at the next meeting is indeed possible if the Fed determines it needs to return to neutral soon with an economic slowdown looming.”
Shares of Home Depot Inc. fell Tuesday morning after the home improvement giant cut its full-year profit outlook in response to weak consumer demand. The company joined a growing list of major companies lowering their outlook for upcoming quarters, citing weak spending.
Investors will get more information on consumer health when July retail sales data is released on Thursday. Bank of America analysts wrote in a note that they expect the data to show healthy spending and put the U.S. on track to avoid a recession.
“In our view, the trajectory of retail spending growth points to a soft landing for the economy. Therefore, investors should expect Fed rate cuts to be slow and steady, at 25 basis points per quarter starting in September, rather than abrupt.”
Below are U.S. stock indexes as of the start of trading at 9:30 a.m. on Tuesday.
Here’s what else is going on:
Commodities, bonds and cryptocurrencies:
- Crude oil futures were slightly lower. West Texas Intermediate crude oil fell 0.75% to $79.47 a barrel, while the international benchmark Brent crude oil was down 0.8% to $81.67 a barrel.
- Gold rose slightly to $2,508 an ounce.
- The yield on the 10-year Treasury note fell 5 basis points to 3.9856%.
- Bitcoin fell 1% to $59,992.
