[New York Stock Market] CPI Falls Short of Expectations... Broad-Based Gains

Semiconductor Stocks Rebound
Limited Gains in International Oil Prices

On the 13th (local time), the three major U.S. stock indices rose across the board as the Consumer Price Index (CPI) growth rate for June slowed faster than expected.

At the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 52,604.67, up 106.03 points (0.20%) from the previous trading day as of 10:35 a.m. The large-cap S&P 500 index increased by 25.69 points (0.34%) to close at 7,541.03, while the tech-heavy Nasdaq closed at 26,056.166, jumping 182.98 points (0.71%).

View of the New York Stock Exchange. New York, USA – Photo by Yoonju Hwang

The focus in the morning was on the release of the June CPI. According to the U.S. Bureau of Labor Statistics, the CPI for June rose by 3.5% year-over-year. This marked a slowdown compared to the previous month’s 4.2% and came in below the 3.8% expected by experts surveyed by Dow Jones.

On a month-over-month basis, CPI fell by 0.4%, also below the expectations of experts (-0.2%). The magnitude of the monthly drop was the largest since April 2020 (-0.8%), during the pandemic, in six years.

Last month’s signing of a memorandum of understanding (MOU) between the U.S. and Iran for an end to hostilities is interpreted as having contributed to easing consumer price pressures by causing a sharp drop in international oil prices. Energy prices fell 5.7% from the previous month, with gasoline prices plunging 9.7% month-over-month. However, on a year-over-year basis, energy prices rose 15.7%, maintaining a high rate of increase compared to the previous year.

Core CPI, which excludes energy and food, rose 2.6% year-over-year, indicating that the growth rate also slowed compared to May (2.9%). Month-over-month, it remained flat.

As inflation cooled, expectations for the Federal Reserve (Fed) to raise rates this year diminished. According to FedWatch, the probability of the Fed raising rates at the July meeting fell to 17% from 42% the previous day.

However, traders still expect a rate hike at the September meeting, and CNBC reported that the probability of the target rate increasing by either 0.25 percentage points or 0.5 percentage points is seen at 63%.

Skyler Winand, Chief Investment Officer at Regan Capital, stated, “A lower-than-expected CPI suggests that surging inflation caused by the Iran war is moderating, but given the recent escalation in tensions, this may only provide temporary relief.”

He continued, “Lower inflation data has increased the likelihood that the Fed will keep rates on hold for the time being and reduced the probability of further hikes. However, Chair Walsh is seeking to stabilize consumer prices, and the most effective tool the Fed currently possesses is rate hikes.”

Semiconductor stocks also rebounded, lifting the stock market. The VanEck Semiconductor ETF (SMH) is trading up by over 2%. Micron is up 2.39%, Lam Research by 3.37%, and Nvidia by 1.56%.

The increase in international oil prices was limited. On the New York Mercantile Exchange, West Texas Intermediate (WTI) crude rose 1.22% from the previous session to settle at $79.09 per barrel. On the ICE Futures Exchange, Brent crude gained 2.03% over the previous session to $84.98 per barrel.

This content was produced with the assistance of AI translation services.