The First Slice for Thursday, August 11, 2022

U.S. stock indexes traded sharply higher on Wednesday, after July’s headline consumer price index showed inflation slowing due largely to lower energy prices, but potentially easing the burden on the Federal Reserve’s monetary policy.

  • The Dow gained +535.10 or +1.63%
  • The S&P 500 advanced +87.77 or +2.13%
  • The Nasdaq rallied +360.88 or +2.89%

The consumer price index was unchanged in July, compared with the 1.3% gain in the prior month, according to the Labor Department. The rate of inflation in the 12 months ended in July slowed to 8.5% from a 41-year high of 9.1% in June.

The closely-watched core measure of inflation that omits volatile food and energy prices rose 0.3% in July, a slower pace than a 0.7% gain in the prior month. The 12-month rate remained steady at 5.9%.

The Federal Reserve will consider the data ahead of its September 20-21 policy meeting where it is expected to raise its benchmark interest rate again.

Following the release of July inflation data, Fed funds futures are now pricing in higher odds of a 50 basis point interest rate hike from the Fed in September, a dramatic shift from just a day ago. 

However, although the inflation data moderated a bit on the back of falling gasoline prices, some analysts still believe it’s running at a worryingly high rate as both shelter and food costs rose significantly. Shelter costs, which make up about one-third of the CPI weighting, rose 5.7% over the past 12 months……Full Loaf Hot Link[read more]

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