Closing Recap

U.S. stocks rallied broadly, with the S&P 500 and Nasdaq closing higher after an in-line to slightly cooler July CPI report reinforced expectations for a September Fed rate cut; small caps surged, while gold and oil prices finished lower, and Treasury yields were mixed. 

Key Takeaways 

• Stocks Rally on CPI Relief: Major indices climbed (S&P +1.14%, Nasdaq +1.39%) after the July CPI report showed inflation largely in line with expectations, with a moderating trend in core prices. 
• Rate Cut Hopes Solidified: The benign inflation data solidified market expectations for a Federal Reserve rate cut in September, with futures pricing in over a 90% probability. 
• Small Caps Surge: The Russell 2000 jumped nearly 3%, significantly outperforming large-cap indices in a sign of broadening market participation and risk appetite. 
• Gold & Oil Slip: Gold prices eased slightly as the CPI report didn’t spark new safe-haven demand, while oil prices continued to slide on demand concerns. 
• Yields Mixed, Dollar Weaker: Short-term Treasury yields fell on rate cut hopes, while the 10-year was little changed. The U.S. dollar likely weakened on the data. 
• Sentiment Remains “Greed”: The Fear & Greed Index held in Greed territory, reflecting the market’s strong upward momentum. 
• Record Buybacks Provide Support: Data showing a record start to the year for U.S. corporate stock buybacks highlights a significant underlying source of demand for equities. 

Market Overview

U.S. equity markets powered higher today, with investors breathing a collective sigh of relief after the much-anticipated July Consumer Price Index (CPI) report came in largely in line with expectations and showed no signs of a “tariff-induced inflation tsunami.” After some initial choppiness, the market embraced the data as a green light for the Federal Reserve to proceed with an interest rate cut at its September meeting, with futures markets pricing in a probability of over 90%. This confirmation of the dovish policy path fueled a broad-based “relief rally” that saw all eleven S&P 500 sectors finish in positive territory. 

Index	Up/Down	% Change	Last
DJ Industrials	483.64	0.011	44458
S&P 500	72.37	0.0114	6445
Nasdaq	296.5	0.0139	21681
Russell 2000	66.27	0.0299	2282

The rally was particularly strong in small caps, with the Russell 2000 surging nearly 3%, a positive sign of broadening market participation after a period of narrow, mega-cap-led advances. While the inflation data was the main event, the market continues to be supported by several underlying factors. Q2 earnings season has been much stronger than anticipated, with analysts now raising their full-year estimates. 

Furthermore, data from Birinyi Associates shows that U.S. companies have announced a record-breaking amount of stock buybacks this year, providing a massive and consistent source of demand for shares. However, some cautionary signals persist, including a notable rise in consumer debt delinquencies and the fact that AI spending, rather than the consumer, has recently been the largest contributor to U.S. GDP growth.

Economic Data

The key U.S. economic release yesterday was the July CPI, which showed inflation largely in line with expectations, supporting the case for a Fed rate cut. 

• Consumer Price Index (CPI) (July): Headline CPI M/M: +0.2% (In line with consensus). 
• Headline CPI Y/Y: +2.7% (Below +2.8% consensus, vs. +2.7% prior). 
• Core CPI M/M (Ex-Food & Energy): +0.3% (In line with consensus). 
• Core CPI Y/Y (Ex-Food & Energy): +3.1% (Above +3.0% consensus, vs. +2.9% prior). 
• U.S. Budget Deficit (July): Grew 19% YoY to $291 billion as outlays grew faster than receipts, despite a large jump in tariff collections.

Commodities, Currencies, and Treasuries 

Gold prices finished slightly lower after a volatile session, with December futures down $5.70 (-0.17%) to settle at $3,399.00 per ounce. The metal saw a whipsaw reaction to the CPI data but ultimately eased as the benign report reduced the need for an aggressive safe-haven bid. Crude oil prices also declined, with the September WTI contract settling down $0.79 (-1.24%) at $63.17/bbl. 

Asset	Up/Down	Unit / % Change	Last
WTI Crude	-0.79	USD/bbl	63.17
Brent	-0.51	USD/bbl	66.12
Gold	-5.7	USD/oz	3399
EUR/USD	0.0052	USD	1.1666
USD/JPY	-0.4	JPY	147.74
10-Year Note	0.022	%	0.04295

The drop was attributed to ongoing demand concerns, despite OPEC leaving its 2025 growth forecast unchanged and trimming its 2026 non-OPEC supply outlook. Corn prices tumbled to contract lows after a USDA report projected a record harvest and ballooning stockpiles. Interest-rate-sensitive two-year Treasury yields fell about 2.3 basis points on the day as the CPI data reinforced September rate cut bets. The benchmark 10-year yield was little changed, up about 2 basis points.

Looking Ahead 

With the pivotal CPI report now in the rearview mirror, the market will likely continue to digest its implications for Fed policy. Attention will shift to the Producer Price Index (PPI) tomorrow and Retail Sales data on Friday for further clues on inflation and consumer health. Q2 earnings season continues, but with less intensity than previous weeks. The ongoing trade negotiations and any new tariff headlines remain a key background factor for market sentiment. The strong performance of small caps today will be watched to see if it signals a sustainable broadening of the market rally.