Stock markets surged on Thursday despite the Bureau of Labor Statistics posting rising inflation. The Dow Jones (DJI) added 617.08 points to close above 46,108 for the first time.
The Consumer Price Index increased by 0.3% from the previous month in August. For the Y/Y comparison, the CPI increase was 2.9%, meeting the consensus and up from 2.7% in the prior month.
Bond markets reacted swiftly, with the 20+ Year Treasury Bill ETF (TLT) trading above $90. Yields across the board fell. Debt markets are pricing in the Federal Reserve to cut rates by 25 bps. Risks are elevated for the S&P 500 (SPY), Russell 2000 (IWM), and Dow Jones falling after the rate cut announcement. Markets would need Fed Chair Powell to hint at another cut in October or by the end of the year.
Inflation is sticky, where airline fares (+5.9%), used cars and trucks (+1%), and apparel (+0.5%) led the rise. A drop in medical care CPI (-0.2%) and communications (-0.1%) helped ease inflation.
The producer price index, however, fell. The free market’s pricing mechanism is reacting with high volatility. Suppliers and businesses cannot adjust to the ever-changing tariffs. Consumers, importers, and foreign manufacturers need to split out who pays the tariffs.
Watch SCOTUS
The Supreme Court accelerated its review of ruling on the illegality of tariffs. Whatever it decides, the markets need to know. That way, if tariffs stay, importers may pass tariffs to American consumers.
Related Stories
