US stocks rose on Tuesday as investors parsed latest inflation data and Federal Reserve Chairman Kevin Warsh’s remarks.
The S&P 500 Index advanced 0.3% at 9:59 a.m. in New York, rallying after Monday’s slump. The Nasdaq 100 Index climbed 1% following a recovery in South Korea’s memory giants, with gains from SK hynix Inc. and Samsung Electronics Co. helping lift peers in the US.
US consumer prices declined in June for the first time in six years, while a key gauge of underlying inflation was little changed. The data takes some pressure off the Fed to raise interest rates. Investors are now awaiting figures on producer prices due Wednesday.
“The market was expecting kind of a softer inflation read, and this number turned out to be a little bit softer than market expectations,” said Subadra Rajappa, head of US research at Societe Generale.“I think I’d be a bit more focused on PPI tomorrow that feeds into core PCE later on this month to get a better read of the Fed’s favorite measure of inflation, which is core PCE.”
The weaker inflation data is likely to reduce chances for interest-rate hikes, according to Regan Capital’s Chief Investment Officer Skyler Weinand, though he flags Warsh’s hawkishness.
“We remind investors that almost every communication that has emanated from Chair Warsh during his short tenure so far has been hawkish,” he said. “Warsh is looking to get consumer prices under control and the best tool the Fed currently has is raising interest rates.”
Warsh is set to tell policymakers that the Federal Reserve has no tolerance for high inflation. In a testimony he is scheduled to deliver before lawmakers at 10 a.m., Warsh will reiterate a vow to tame price growth that has been elevated for five years. The testimony was prepared prior to the release of consumer inflation data covering June.
In geopolitical news, the interim peace agreement between the US and Iran has effectively collapsed. American forces reimposed a naval blockade and launched another wave of airstrikes, while Tehran attacked more oil tankers sailing through the Strait of Hormuz.
Brent crude surged to $85.77 a barrel as a result, its highest level in more than a month.
“The latest news from the Middle East does not suggest that a quick resolution is available at this time, and so far, there has been no TACO from Trump,” said Kathleen Brooks, research director at XTB.
Among single-stock moves, JPMorgan Chase & Co. rose 1% after it reported its highest quarterly profit ever as stock traders blew past analysts’ estimates. Wells Fargo & Co. fell after reporting results while Bank of America Corp. shares climbed. Goldman Sachs Group Inc. rose after beating expectations on equities sales and trading revenue for the second quarter.
Outside of the banks, International Business Machines Corp. slumped 23% after reporting preliminary quarterly sales that missed analyst estimates.
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