Wall Street closed sharply higher on Tuesday following a less-than-expected inflation rate for July. Market participants are overwhelmingly hopeful for the first interest rate cut in September. Positive news on the trade front also boosted investors’ sentiment. All three major stock indexes ended in positive territory.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) gained 1.1% or 483.52 points to close at 44,458.61. Notably, 22 components of the 30-stock index ended in positive territory and eight finished in negative territory. The blue-chip index is currently 1.4% away from its all-time high recorded in December 2024.
The tech-heavy Nasdaq Composite finished at 21,681.90, rallying 1.4% or 296.50 points, due to the strong performance from big techs. This marked a new closing high for the tech-laden index. During intraday trading, the index recorded a new all-time high of 21,689.68.
The major gainer of the index was NXP Semiconductors N.V. NXPI. The stock price of the analog semiconductor manufacturer surged 7.3%. NXP Semiconductors currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The S&P 500 advanced 1.1% to finish at 6,445.76, marking a new closing high for the index. During intraday trading, Wall Street’s most observed benchmark posted a new all-time high of 6,446.55. All 11 broad sectors of the broad-market index ended in positive territory.
The Technology Select Sector SPDR (XLK) and its close resemblance the Communication Services Select Sector SPDR (XLC) rose 1.6% and 1.9%, respectively. Moreover, the Financials Select Sector SPDR (XLF), the Consumer Discretionary Select Sector SPDR (XLY), the Industrials Select Sector SPDR (XLI) and the Materials Select Sector SPDR (XLB) rose 1.2%, 1.1%, 1% and 1.3%, respectively.
The fear gauge CBOE Volatility Index (VIX) was down 9.4% to 14.73. A total of 16.4 billion shares were traded on Tuesday, lower than the last 20-session average of 18.3 billion. Advancers outnumbered decliners on the NYSE by a 4.26-to-1 ratio. On the Nasdaq, a 2.69-to-1 ratio favored advancing issues.
Economic Data
The Department of Labor reported that the headline consumer price index (CPI) – popularly known as household inflation – rose 0.2% in July. The Zacks Consensus Estimate as well as the metric for June was 0.3%. Year over year, CPI increased 2.7% in July compared with the Zacks Consensus Estimate of 2.8%.
Core CPI (excluding volatile food and energy items) rose 0.3% in July, in line with the Zacks Consensus Estimate. The metric for June was 0.2%. Year over year, Core CPI increased 3.1% in July compared with the Zacks Consensus Estimate of 3%.
Expectations of Interest Rate Cut
Following the release of the inflation report, market participants seem more optimistic about the first interest rate cut by the Fed in its September FOMC meeting. Expectations of a rate cut have gathered steam following unexpectedly weak jobs additions in July as well as the significantly downwardly revised jobs data for both June and May.
The CME FedWatch currently shows an 94.5% probability that the central bank will reduce the benchmark lending rate by 25 basis points in September. This probability was 84% just before the release of the inflation data. The existing Fed funds rate is in the range of 4.25- 4.5%.
Development on Trade Front
On Aug. 11, the President extended the date for the imposition of tariffs on Chinese goods by another 90 days. The previous deadline was up to mid-night Aug. 11. The new executive order signed by Trump will maintain the status quo on the U.S.-China tariff front till mid-November.
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NXP Semiconductors N.V. (NXPI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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