The Dow Jones Industrial Average rallied over 350 points on Tuesday in choppy trading, thanks to easing US inflation pressures. The US Producer Price Index (PPI) inflation eased more than expected in July, leading to a surge in stocks and sending the DJIA to 39,700.00. US PPI inflation dropped to 2.2% YoY in July, below the forecasted 2.3% and significantly lower than the previous period’s 2.7%. This decline in inflation pressures boosted risk appetite in the market session, with market bets of a 50 basis point cut in September from the Federal Reserve rising to 55%.
The Home Depot reported a healthy quarter despite weakness among US consumers. US PPI inflation easing and core PPI inflation falling below expectations further fueled investors’ risk appetite. Market bets for a 50 basis point cut in September from the Federal Reserve saw an increase to 55%. The upcoming key data print of US Consumer Price Index (CPI) inflation on Wednesday is eagerly awaited. Markets have already priced in at least a quarter-point cut from the Fed on September 18, and any continued easing in inflation metrics may lead to a further increase in bets of a double cut.
The Dow Jones’ constituent securities mostly gained on Tuesday, with notable movements in Walmart Inc. and Nike Inc. Walmart Inc. fell -1.25% to $67.80 per share, while Nike Inc. rallied 5.6% to $78.83 per share following positive investor sentiment around new franchise shoe releases and downstream production chain improvements. The Dow Jones’ rally on Tuesday pushed the index to a one-week high near 39,800.00, aiming to reclaim the 40,000.00 major price handle. The index is trading back above the 50-day Exponential Moving Average (EMA) for the first time since early August, with long-run trends still favoring buyers.
Investors are closely watching the economic indicators such as the Consumer Price Index (CPI) to gauge inflationary or deflationary tendencies. The CPI measures the prices of a basket of representative goods and services on a monthly basis and is released by the US Department of Labor Statistics. The year-over-year (YoY) reading compares prices of goods in the reference month to the same month a year earlier. A high reading is typically seen as bullish for the US Dollar (USD), while a low reading is viewed as bearish. The upcoming CPI data release will provide further insights into inflation and purchasing trends in the US market.
In conclusion, the Dow Jones Industrial Average saw a significant rally on Tuesday due to easing US inflation pressures and positive investor sentiment. The upcoming release of US Consumer Price Index (CPI) data is eagerly awaited, with markets already pricing in a Fed rate cut in September. The Dow Jones’ rally pushed the index to a one-week high near 39,800.00, with an aim to reclaim the 40,000.00 major price handle. Investors are closely watching economic indicators such as the CPI to navigate market movements and gauge inflation trends in the US.
