Inflation Makes Dow and S&P 500 Slip as Nasdaq Index Remains High
The stock market indices are overall down today as a June CPI report showed that inflation was higher than anticipated.
Quick overview
- A new report indicates rising inflation, causing a dip in most stock markets, though the Nasdaq index saw a slight increase.
- June's Consumer Price Index showed a 0.3% monthly increase, leading to a 3.5% annual rate, which is higher than expected.
- Tariff fears, particularly from President Trump's recent announcements, are contributing to the inflation and stock market fluctuations.
- Despite the inflation news, strong quarterly earnings from financial stocks like JPMorgan Chase and Wells Fargo suggest continued consumer spending.
A new report this week showed that inflation is rising, leading to a dip in most stock markets, but it was not enough to sink the tech-heavy Nasdaq index.
The June CPI (Consumer Price Index) report demonstrated that inflation was higher than expected, and Fed Chairman Jerome Powell says the inflation reports that release during the summer will be important to the decision to issue rate cuts.
June’s CPI showed an increase of 0.3% prices for the month, which resulted in a 3.5% annual rate increase. That was a step in the wrong direction after May’s numbers showed an increase of just 0.1%.
Inflation was expected to rise, however, especially after President Donald Trump issued new tariffs to many countries and threatened massive tariff increases to key trade partners Mexico and Canada. Tariff fears have been driving stock market prices and rising inflation this year, and it looks like there will be little reprieve from new tariffs for now.
The Stock Market Reacts
As the CPI report came in and showed higher inflation, the Dow Jones dipped by 0.94%. The S&P 500 lost 0.40% as well, creating an overall downward trend for the stock markets. The Nasdaq was the one bright spot among the indices, with an increase of 0.18% by the end of trading on Tuesday.
Both the S&P 500 and the Nasdaq Composite remain close to their all-time highs. It is going to take a lot of selling pressure to bring those indices down significantly, so Tuesday’s market report is not as gloomy as it may first appear.
The market is being pulled downward by the inflation news as well as the fact that market prices have soared in recent weeks and achieved new highs, particularly in the cases of Microsoft (MSFT) and Nvidia (NVDA). Microsoft is already seeing some pullback, with a loss of 0.17% on Tuesday. Nvidia is still riding its recent high and gained 4.04% on Tuesday.
The outlook for Wednesday trading is one of muted action. Selling pressure will be elevated due to the June CPI report, but an overall strong economy will keep stock values from falling too much.
This is a major week for financial stocks, and both JPMorgan Chae and Wells Fargo reported better than expected quarterly earnings. Their reports will help keep the stock market elevated as they demonstrate plenty of consumer spending and lending taking place. As long as consumers are spending and not holding on tightly to their wallets, the economy remains mobile and has the potential to climb higher quickly, staving off stagnation.
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