Yesterday, U.S. Producer Price Index (PPI) came in lower than expected, easing fears of runaway inflation and bolstering expectations that the Fed could begin cutting interest rates. The market now anticipates possibly multiple cuts before year-end. The market is now awaiting August Consumer Price Index (CPI), scheduled for release at 1.30pm today; these figures may cause volatility, as traders look for signs of inflation cooling or persisting, Markets are buoyed by a tech rally triggered by Oracle’s 36% surge, driven by AI demand and contract gains, the S&P made a new all-time high.
Stock markets often fall on a hotter-than-expected CPI surprise, as stronger inflation pressures reduce the likelihood of near-term rate cuts and can prompt fears of prolonged high interest rates. Crypto, growth and high-valuation tech stocks are usually most sensitive and may underperform due to higher discount rates, while some sectors such as banks and energy may hold up better since they can benefit from rising yields or inflation hedges.