Wall Street advanced on Tuesday after a softer-than-expected consumer inflation reading eased investor concerns over the potential impact of President Donald Trump’s tariff policies on prices.
The Dow Jones Industrial Average rose 200 points, or 0.5%, while the S&P 500 gained 0.4% and the Nasdaq Composite added 0.6%.
The consumer price index increased 2.7% in July from a year earlier, slightly below the 2.8% rise forecast in a Dow Jones survey.
Core CPI, which excludes food and energy, rose 3.1%, just above the 3% expectation.
The data bolstered expectations that the Federal Reserve could lower interest rates multiple times in 2025.
According to CME’s FedWatch Tool, markets are pricing in a nearly 91% probability of a rate cut in September, up from 85% before the release.
Traders also increased wagers on additional cuts in October and December.
The figures come as Trump said Monday he would extend a 90-day pause on higher tariffs for Chinese goods.
Investors will now look to Thursday’s producer price index for further signs of inflation trends, with both reports feeding into expectations ahead of the Fed’s Jackson Hole gathering later this month and its September policy meeting.
US inflation picks up in line with expectations
US consumer prices rose modestly in July, with headline inflation advancing 0.2% on a seasonally adjusted basis and 2.7% from a year earlier, slightly below economists’ expectations for 2.8%, according to the Bureau of Labor Statistics.
The monthly reading matched estimates.
Core CPI, which excludes food and energy and is viewed by Federal Reserve policymakers as a more reliable gauge of underlying inflation, climbed 0.3% in July and 3.1% annually.
| Metric | Actual | Estimate |
|---|---|---|
| CPI MoM | +0.2% | +0.2% |
| Core CPI MoM | +0.3% | +0.3% |
| CPI YoY | +2.7% | +2.8% |
| Core CPI YoY | +3.1% | +3.0% |
Both figures were in line with forecasts, apart from the yearly reading, which came in a touch above the expected 3%.
Shelter costs, up 0.2% on the month, accounted for much of the overall increase, while food prices were flat and energy prices fell 1.1%.
New vehicle prices, a category sensitive to tariff pressures, were unchanged, while used cars and trucks rose 0.5%.
Transportation services and medical care services each recorded 0.8% gains.
The figures indicate that tariffs imposed by President Donald Trump have so far had only a modest impact on consumer prices, with inflation pressures remaining contained even as trade tensions persist.
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