Inflation landed broadly in line with expectations in July, easing pressure on the Federal Reserve to hike rates in September and fueling a premarket rally in technology and semiconductor stocks.
Between 8:25 a.m. and 8:55 a.m. ET, Bloom Energy Corp. (BE) led the premarket gainers tracked by market data, rising 4.27%. NXP Semiconductors N.V. (NXPI) followed with a 2.64% gain.
The July Consumer Price Index (CPI) rose 3.4% from a year earlier, matching expectations, while core inflation eased to 2.5%, also as expected.
CME FedWatch tool now assigns a 42% probability on an interest-rate hike in September, slightly down from yesterday's 45% odd.
More importantly for markets, the two-year Treasury yield fell after the release.
AI Stocks Lead The Premarket Move
The in-line inflation reading is easing pressure on the Fed to hike rates in September, helping revive risk appetite across some of the market's hardest-hit growth names in July.
The reaction was particularly visible across the AI infrastructure trade.
Coherent Corp. (COHR) gained 1.95%, while Cerebras Systems Inc. (CBRS) rose 1.90%. Lam Research Corp. (LRCX) added 1.66%, and Seagate Technology Holdings PLC (STX) climbed 1.61%.
Applied Materials Inc. (AMAT) was up 1.53%.
SanDisk Corp. (SNDK) also gained 1.51% in premarket trading.
| Stock | Premarket Move |
|---|
| Bloom Energy | +4.27% |
| NXP Semiconductors | +2.64% |
| Coherent | +1.95% |
| Cerebras Systems | +1.90% |
| Lam Research | +1.66% |
| Seagate Technology | +1.61% |
| Applied Materials | +1.53% |
| SanDisk | +1.51% |
| Keysight Technologies Inc. (KEY) | +1.44% |
| Wheaton Precious Metals Corp. (WPM) | +1.44% |
Data: Premarket stocks with the biggest gains following the July CPI report, tracked by market data between 8:25 and 8:55 a.m. ET.
Why This Is Not A Return To The Rate-Cut Trade
The market reaction should not be confused with a full-blown shift toward easier monetary policy.
Fed funds futures still showed a 43% probability of a 25-basis-point rate hike at the September meeting, compared with a 57% probability of no change.
That is a meaningful improvement for growth stocks compared with the 48.4% hike probability priced one week earlier.
But it leaves the Federal Reserve with a difficult balancing act.
Headline inflation is easing. Core inflation is now at 2.5%. Yet energy prices remain 14.7% higher than a year ago, while shelter costs are still rising 3.2%.
Before the Fed's Sept. 16 meeting, markets will have to digest one more CPI report and another batch of labor market data, either of which could reshape expectations for the policy decision.
