U.S. Stocks Surge 1%+ as CPI Eases Inflation Fears, Fed Cut Hopes Rise

On August 12, the U.S. stock market experienced a significant rally, with all three major indices—the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite—closing with gains exceeding 1%. The S&P 500 and Nasdaq Composite indices both reached new all-time highs, driven by a favorable Consumer Price Index (CPI) report that eased inflation concerns and bolstered expectations for a September interest rate cut by the Federal Reserve.

The S&P 500 index rose by 1.13%, closing at 6445.76 points, while the Nasdaq Composite index surged by 1.39%, closing at 21681.90 points. The Dow Jones Industrial Average also gained 1.10%, closing at 44458.61 points. The rally was broad-based, with all major sectors of the S&P 500 index posting gains. Technology stocks, in particular, saw significant gains, with all seven major tech companies—Meta Platforms (formerly Facebook), Microsoft, Google, Apple, NVIDIA, Tesla, and Amazon—experiencing increases. Meta Platforms rose by more than 3%, while Microsoft, Google, and Apple all gained over 1%. NVIDIA and Tesla saw increases of 0.57% and 0.53%, respectively, and Amazon rose by 0.08%.

The positive market sentiment was fueled by the July CPI data, which showed a lower-than-expected increase in consumer prices. These figures suggested that inflation pressures were not as severe as previously feared, which in turn increased the likelihood of an interest rate cut by the Federal Reserve in September. The market's reaction to the CPI data was swift and decisive. Investors interpreted the report as a green light for the Federal Reserve to ease monetary policy, which would support economic growth and corporate earnings. The prospect of lower interest rates also made stocks more attractive relative to bonds, driving further gains in the equity market.

The rally in U.S. stocks was not limited to the major indices. Individual stocks also performed well, with several companies reaching new highs. For example, the Nasdaq Golden Dragon China Index, which tracks the performance of Chinese companies listed on U.S. exchanges, also gained 1.49%, with Tencent Music and NIO, an electric vehicle manufacturer, both rising by more than 11%.

The strong performance of U.S. stocks was also supported by positive developments in the broader economy. The U.S. economy added 528,000 jobs in July, exceeding expectations and indicating that the labor market remains robust. Additionally, the U.S. budget deficit for July was reported at $291.1 billion, slightly higher than the estimated deficit of $239.15 billion. However, the increase in the deficit was largely due to higher government spending, which is a positive sign for economic growth.