Inflation Surge Drives Market Decline S&P 500 Drops 0.4%

On Tuesday, the stock market experienced a decline as new data from the Consumer Price Index (CPI) revealed rising inflation. The CPI data showed that consumer prices increased by 2.7% in June compared to the same period last year, marking a faster pace than the 2.4% increase seen in May. This data release was in line with economists' expectations, but the market reacted negatively, with the S&P 500 dropping by 0.4% and the Dow Jones Industrial Average losing nearly 1%.

The market's reaction was influenced by the looming Aug. 1 deadline for President Donald Trump's tariff campaign, which has been a significant factor in market volatility since its announcement in April. The existing tariffs have already begun to impact consumer goods, and the threat of further tariff hikes has investors on edge. The market has seen significant fluctuations since Trump's aggressive trade policies were unveiled, with a notable collapse in the spring followed by a partial recovery.

The CPI is a key indicator for measuring inflation and is closely watched by investors for potential macroeconomic changes, such as adjustments to Federal Reserve interest rates. While the CPI has been trending downward since its peak in 2022, the recent increase has raised concerns about prolonged rate cuts. Federal Reserve Chair Jerome Powell has warned that Trump's tariffs could negatively impact inflation, a view that has been met with resistance from the administration.

The new CPI data triggered mixed results for individual stocks. Banks like Wells Fargo and JPMorgan saw their shares drop despite reporting better-than-expected earnings. In contrast, Nvidia's stock rose after the company announced plans to resume sales of certain general processing units to China, which had been restricted due to export controls. Nvidia's market capitalization reached $4 trillion, making it the first company to achieve this milestone.

Investors are closely watching the Aug. 1 deadline for Trump's new tariff measures, which would impose steep import costs on dozens of U.S. trading partners. Despite the uncertainty, some analysts remain optimistic about the long-term prospects of the U.S. economy. Jacon Manoukian, the U.S. head of investment strategy at JP Morgan, expressed confidence in the U.S. economy's dominance, dismissing the "Sell America" trade as short-sighted. "We completely disagree with the idea that the U.S. is somehow losing its position as the center of the financial universe," he stated.

Other assets also experienced declines on Tuesday. Bitcoin, which had been on a hot streak, fell by around 2.9% and dropped below its new benchmark of $120,000, though it remained above $115,000. The House of Representatives is currently engaged in a "Crypto Week," considering various bills to establish regulatory frameworks for stablecoins and other cryptocurrencies. Circle, a stablecoin company that went public in June, saw its shares fall by about 4.6% on Tuesday.