Market Wrap | Inflation Steady at 27% S&P 500 Surges 113% as Fed Rate Cut Bets Rise

On August 12, 2025, the U.S. July CPI report revealed that inflation remained steady at 2.7%, slightly below expectations, hinting at a potential Federal Reserve rate cut in September. This news coincided with increased betting on a September rate cut, with an 85.9% probability, aligning with the Fed's anticipated policy shift as labor market conditions show signs of weakening. Meanwhile, the U.S. stock market saw significant gains, with the S&P 500 Index rising 1.13%, the Dow Jones Industrial Average increasing 1.10%, and the Nasdaq Composite Index surging 1.39%.

The technology, communication services, materials, and financial sectors outperformed the S&P 500 index. Notably, the communication services sector demonstrated exceptional performance.

UnitedHealth Group shares rose 3.65% as insiders continue to buy the stock, signaling confidence in the company's future performance. Meta Platforms Inc. saw its stock rise 3.15% as the company's aggressive push into AI and digital advertising reinforces investor confidence. Alibaba Group Holding Ltd. shares surged 3.19% following news that US chip exports to China have eased, boosting investor sentiment.

180 Life Sciences' stock surged over 200%, driven by a strategic shift towards a crypto-centric approach and significant Ethereum holdings, which bolstered investor confidence. X4 Pharmaceuticals saw its stock rise nearly 82%, propelled by strong Q3 results that showcased robust revenue growth, pleasing investors. Meanwhile, Spirit Aviation's stock plummeted over 40%, as the company issued a warning about substantial doubt regarding its ability to continue as a going concern. Myomo's stock also dropped over 38%, following reduced revenue guidance and increasing operational losses, leaving investors concerned.

Several key developments may influence the U.S. stock market today. The July CPI report has led analysts from TD Securities to predict that the Federal Reserve might begin rate cuts earlier than anticipated, potentially starting in September. This aligns with Treasury Secretary's suggestion for a 50 basis point rate cut in September. Traders are increasingly betting on Fed rate cuts next month, with a projected 85.9% probability for a 25 basis point reduction. Meanwhile, Australian courts have ruled against Apple and Google for anti-competitive practices, which could have implications for their operations. Additionally, Nvidia faces a 15% export tax on AI chips to China, amid ongoing international trade dynamics. These events underscore potential shifts in monetary policy, regulatory scrutiny, and international trade, impacting market sentiment and valuations.