Equities Rise Intraday as Markets Track Tariff News, Await Inflation Data

Equities rose intraday on Monday as markets tracked tariff news and awaited inflation data, with investors hoping for a benign reading that could signal a pause in the Federal Reserve's aggressive rate hikes. The Dow Jones Industrial Average (DJIA) gained 229.63 points, or 0.7%, while the S&P 500 rose 1.1%, and the Nasdaq Composite advanced 1.3%. Overseas, the pan-European Stoxx 600 climbed 1.8%, and Tokyo's Nikkei 225 jumped 1.2%.



The market's optimism was fueled by hopes that the upcoming consumer price index (CPI) report, scheduled for release on Tuesday, would show a slowdown in inflation. Economists expect the CPI to decline 0.1% month-over-month, while still rising 8.1% from a year ago. This decrease is driven by softer Chinese producer prices, softer rents, softer used car prices, and softer gasoline prices (Source: Swissquote Bank).



If the data is soft enough, or ideally softer than expected, equities will likely continue pushing higher this week as well. A softer inflation print could signal that the Fed would then dial back its interest rate increases, which tend to be bad news for stocks. The Fed is widely expected to raise its benchmark rate by 75 basis points this month, but a softer inflation print could result in a half-point hike instead.

However, Fed speakers last week, including Christopher Waller and Loretta Mester, were adamant that the central bank would remain vigilant in the fight against inflation. This suggests that even a weaker CPI wouldn't change the course of monetary policy in the near term. Still, investors are hoping for a softer inflation reading to provide some relief from the Fed's aggressive rate hikes.

The U.S. dollar continued to slide on Monday, adding strength to crude prices. The U.S. Dollar Index, which measures the greenback against a basket of six peers, was down 0.8%, with the dollar almost 3% lower from its 20-year high reached last week. Futures contracts for oil, which dominate in commodity trading, are priced in dollars. Futures for U.S. benchmark West Texas Intermediate crude gained 1.3% to nearly $88 a barrel.



"Crude could extend its winning run to three sessions if it holds on, recovering from the lows which came on the back of lower global growth expectations and Covid lockdowns in China," said Craig Erlam, an analyst at broker Oanda. "A broader improvement in risk appetite, a weaker dollar, and expectations that the OPEC+ group of national producers may trim demand were supporting prices."

In summary, equities rose intraday as markets tracked tariff news and awaited inflation data, with investors hoping for a benign reading that could signal a pause in the Federal Reserve's aggressive rate hikes. The market's optimism was fueled by hopes that the upcoming consumer price index (CPI) report would show a slowdown in inflation. However, Fed speakers last week were adamant that the central bank would remain vigilant in the fight against inflation, suggesting that even a weaker CPI wouldn't change the course of monetary policy in the near term.