U.S. Equities Reach New Heights Amid Inflation Data

US equities reached new highs midweek after the July CPI print showed a 0.2% monthly increase and a 2.7% yearly increase in headline inflation, and a 0.3% monthly increase and a 3.1% yearly increase in core inflation. The data kept the narrative of a potential September interest rate cut alive.

US equities reached new highs midweek following the July Consumer Price Index (CPI) print, which showed a 0.2% monthly increase and a 2.7% yearly increase in headline inflation, along with a 0.3% monthly increase and a 3.1% yearly increase in core inflation. The data kept the narrative of a potential September interest rate cut alive [1].

The July CPI report, released by the Bureau of Labor Statistics, indicated that consumer prices rose at a slower pace than expected, but the core inflation rate was higher than anticipated. This mixed inflation signal has kept investors on edge regarding the Federal Reserve's monetary policy.

In the crypto market, the inflation data also sparked a wave of liquidations, with over $1 billion in positions liquidated over 24 hours, including about $782 million in longs. Bitcoin and Ethereum's native tokens dipped after the inflation results, with Bitcoin falling more than 2% and Ethereum's native token slightly falling [1].

The Producer Price Index (PPI) also rose 0.9% month over month and 3.3% year over year, the fastest annual pace since February, according to data released on Thursday. Economists had looked for around 2.5% year-over-year. The PPI reading likely stoked concern that economic pipeline pressures could complicate the Federal Reserve’s path to easing. However, interest-rate futures still imply elevated odds of a September rate cut, suggesting markets view the PPI spike as a potential outlier unless confirmed by coming data [1].

Derivatives positioning remains a focal point. Open interest across altcoins has climbed to a record $47 billion, a leverage build that analysts say can amplify both rallies and drawdowns when volatility picks up [1].

The downbeat PPI reading arrived just days after a softer consumer-price report supported a risk-on tone. With inflation signals mixed and positioning stretched, experts expect elevated two-way volatility into next week’s jobs data and upcoming meeting from last month’s Federal Open Market Committee session.

Gold prices could see higher highs with a September interest rate cut on the table. The chance of a rate cut is at 88.5%, as noted by CME Group’s FedWatch. U.S. Treasury Secretary Scott Bessent believes the Federal Reserve will cut interest rates by half a point at its September meeting. Fueling more upside are geopolitical and economic uncertainties, growing central bank demand, and a weaker U.S. dollar [2].

Equinox Gold Corp. (NYSE: EQX) (TSX: EQX), Newmont Corporation (NYSE: NEM) (TSX: NGT), Barrick Mining (NYSE: B) (TSX: ABX), Franco-Nevada Corp. (NYSE: FNV), and B2Gold Corp. (NYSE AMERICAN: BTG) (TSX: BTO) are among the gold stocks that could benefit from a potential rate cut [2].

References:
[1] https://www.theblock.co/post/366985/crypto-liquidations-hit-1-billion-after-hotter-than-expected-ppi-inflation-shock
[2] https://www.theglobeandmail.com/investing/markets/stocks/GS-N/pressreleases/34157671/gold-could-see-higher-highs-with-a-september-interest-rate-cut-on-the-table/