The inflation data encouraged traders to scale back bets for how much the Fed will raise interest rates at its next meeting.
The S&P 500 was 2% higher amid a widespread rally that took off immediately after a report showed the nation’s biggest economic challenge, inflation, slowed to 8.5% at the consumer level last month from 9.1% in June. Technology stocks, cryptocurrencies and other investments that have been the year’s biggest losers due to the Fed’s aggressive rate hikes were some of the morning’s biggest winners.
Much of July’s slowdown in inflation was due to drops in prices for gasoline and oil. But even after ignoring those and Such differences may not sound like much, but interest rates help set where prices go across financial markets. And higher rates tend to pull down prices for everything from stocks to commodities to crypto.
The 10-year yield fell more slowly, down to 2.72% from 2.78%, narrowing how far below it is the two-year yield. Many investors see such a gap as a fairly reliable signal of a coming recession.Recession worries have built as the highest inflation in 40 years squeezes households and corporations around the world. The Fed and other central banks have been hiking rates to slow the economy in hopes of stamping out inflation, but they risk choking it off if they move too aggressively.
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