The dollar rallied broadly after July CPI matched forecasts, lowering the probability of a September Fed hike to 39%. Yields mixed, stocks mostly higher, AI shares surged.
July U.S. consumer price data landed within a hair of consensus. Headline CPI rose 0.1% month over month and 3.4% year over year, matching expectations. Core CPI added 0.2% on the month and 2.5% on the year, the lowest annual core reading since February. Shelter costs held firm, with owners' equivalent rent and primary rents each up 0.3%. Energy prices fell 1.5%, and gasoline dropped 2.9%, keeping a lid on the headline number.
The market took the report as a green light for the Federal Reserve to stay on hold at the September meeting. The implied probability of a September rate hike slipped to around 39% from 44% before the release, according to the CME FedWatch measure.
That dovish tilt did not hurt the greenback. The U.S. dollar reversed its early declines and closed higher against every major currency. The largest gain came against the New Zealand dollar, the smallest against the Australian dollar. The dollar also posted solid gains against the Swiss franc, the Canadian dollar and the Japanese yen. The gains were modest but broad, extending across the entire major-currency board.
U.S. Treasury yields started the North American session lower and dipped further after the CPI release. Those declines faded as the day wore on. By the close, front and intermediate maturities were still slightly lower, while longer-term yields had moved higher.
U.S. equity indexes were mostly higher. The Nasdaq 100 led the major benchmarks, while the Dow Jones Industrial Average edged modestly lower. The Russell 2000, the small-cap index, reached a new record closing high.
The standout action was in AI and data-center shares. Nebius surged 34% after reporting Q2 revenue of $582 million, up 454% from a year earlier, with its AI cloud revenue jumping 514%. CoreWeave gained 19%. Lumentum, Bloom Energy, Skyworks, Credo, Coherent and Arista Networks – which carries an Alpha Score of 55 (Moderate) on AlphaScala's proprietary rating – were also among the strong performers.
Crude oil was relatively quiet. Prices touched a high of $84.35 and a low of $82.40. The last trade was near the low at $82.80, down about $0.40 on the day.
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