Stocks Jump After Tame Wholesale Inflation Fuels Fed Pivot Hopes
U.S. stocks are rallying Tuesday after a lower-than-expected 0.1% rise in the producer price index for July reinforces hopes the Federal Reserve could soon pause its aggressive rate hiking campaign. The S&P 500 surges over 1%, while the Nasdaq spikes 1.5% as the tame reading on wholesale inflation follows last month's surprise drop in consumer prices.
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The Dow also climbs, shaking off an earlier drag from Home Depot's reduced sales outlook, as investors cheer signs of easing inflationary pressures. The PPI data adds significance to Wednesday's consumer price index report, with any continued moderation in price pressures likely cementing expectations for the Fed to hold rates steady at their September meeting.
While markets have been oversold recently, the upbeat inflation figures could finally represent the "true flush" that sets up a sustained rebound, according to some analysts. The rally demonstrates investors' fervent hopes that the Fed's rate hikes are succeeding without causing a severe economic downturn.
