Futures tied to the major U.S. stock indexes were in positive territory on Tuesday morning, pointing to a higher open after fresh inflation data met expectations and bolstered hopes for a Federal Reserve rate cut next month.
The Labor Department reported that the consumer price index climbed 0.2% in July, following a 0.3% gain in June. The result matched economist forecasts. On a yearly basis, inflation held steady at 2.7%, surprising analysts who had anticipated a modest rise to 2.8%.
Core CPI, which excludes the often-volatile food and energy categories, rose 0.3% in July after a 0.2% increase the month prior. The annual core inflation rate accelerated to 3.1% from 2.9%, slightly higher than the 3.0% predicted.
Market participants appeared to interpret the data as a green light for the Fed to begin loosening monetary policy. According to the CME FedWatch Tool, traders are now pricing in a 90.1% probability of a quarter-point cut in September.
Monday’s session saw indecisive trading, with the major averages fluctuating around the flat line before finishing lower. The Dow fell 200.52 points, or 0.5%, to 43,975.09, the Nasdaq slid 64.62 points, or 0.3%, to 21,385.40, and the S&P 500 dropped 16.00 points, or 0.3%, to 6,373.45.
The muted tone reflected caution ahead of a packed week of economic reports, including producer price inflation, retail sales, and industrial production.
Most sectors posted only small moves, though oil services stocks were a notable weak spot. The Philadelphia Oil Service Index slid 2.1%, even as crude prices advanced. Energy producers and transportation stocks also lost ground, dragging on the broader market.
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