US stocks cautiously rise ahead of CPI data

As investors analysed Chinese economic data, a significant US inflation report, and corporate profits on Monday, Wall Street equities increased marginally but oil prices and the currency declined. The S&P 500 increased by 0.24%, the Nasdaq Composite increased by 0.18%, and the Dow Jones Industrial Average increased by 0.62%.

The tourism and leisure sector led gains as European shares edged higher. Consumer pricing data for China decreased in June, pointing to the possibility of more monetary policy easing but also highlighting China’s difficulty in reviving its economy and preventing a deflationary cycle. Citigroup upgraded European peers while downgrading US companies in anticipation of a decline in growth stocks and a recession in the fourth quarter of the year.

According to forecasts, US consumer prices will indicate headline inflation has slowed to 3.1%, from 9.1% a year earlier, which is the lowest level since early 2021. After dropping for two straight months, US wholesale inventories were steady in May, indicating inventory investment may have a positive impact on economic growth in the following three months. Markets are beginning to accept the idea that central banks will be compelled to maintain strict policies in order to reduce inflationary pressures.

The recent rise in bond yields may be supported by this week’s disappointing CPI inflation statistics because markets anticipate a rate hike from the Fed. With the central bank of Canada meeting this week and a 69% possibility of another increase, markets have also factored in higher interest rates in Europe and the United Kingdom.

Bond markets have been devastated by the possibility of higher rates around the world for an extended period of time. Last week, U.S. 10-year yields increased by 23 basis points, German yields by 24 basis points, and UK yields by 26 basis points. On Monday, as investors continued to factor in views that the Federal Reserve is reaching the conclusion of its tightening cycle.