Late Tuesday brought exploding COVID-19 cases and a rollback to previous pandemic restrictions in California, Hong Kong, and India. Thus far, investors in U.S. stocks are largely discounting the news. At the halfway point of the Wall Street session, the DJIA DOW (+285), S&P 500 SPX (+12), and NASDAQ (-10) are mixed. For now, optimism remains the go-to sentiment for equities bulls.

In addition to the COVID-19 developments, this morning brought a group of encouraging U.S. inflation stats. Here’s a quick look at the highlights:

Event                                              Actual                Projected         Previous 

CPI(MoM, June)                               0.6%                      0.5%                -0.1%

CPI(YoY, June)                                 0.6%                       0.6%                 0.1%

Core CPI(MoM, June)                      0.2%                      0.1%                -0.1%

Core CPI(YoY, June)                        1.2%                       1.1%                  1.2%

The key figures here are the Core CPI numbers. These two metrics are energy-exclusive and stack up well in comparison to projections and 2019. While lagging inflation is still sure to be a concern on the FED’s radar, it appears a deflationary cycle has been avoided. 

On a side note, the NFIB Business Optimism Index (June) came at 100.6. This is a relatively strong figure, eclipsing the previous release (94.4) and consensus projections (90.9). As we move into mid-July trade, things are looking up for those U.S. stocks not in the path of more COVID-19 shutdowns.

U.S. Stocks Rally, Safe-Havens Hold Firm

It’s been a slow day for safe-havens, led by a slight $2.10 fall in GOLD futures. In a Live Market Update from Monday, I outlined a key resistance level in the USD/JPY. As of now, it is proving valid.

Overview: Although inflation appears to be driving higher, there’s no expectations of the FED’s dovish policy being abandoned anytime soon. According to the CME FEDWatch Index, a 100% chance of interest rates being held at 0.0-0.25% is in place until at least March of 2021. If we see inflation move significantly higher in Q3 and Q4, then these odds are likely to change. Should the FED stick with its dovish tone amid a spike in inflation, the long-term outlook is bearish for the USD and bullish for U.S. stocks.