S&P hits record high as stocks rise on inflation data
The S&P 500 closed 1.1 percent higher, rising more than 70 points to close at a record high of 6,445.8. The Dow Jones Industrial Average and Nasdaq composite also rallied 1.1 percent and 1.4 percent, respectively.
Stocks rallied after the Bureau of Labor Statistics released new consumer price index (CPI) data showing inflation plateauing, largely in line with the projections of economists.
Prices rose roughly 2.7 percent on the year and 0.2 percent in June, according to the report, as falling gasoline prices wiped out increases in prices for airline tickets, used cars, medical care and other services.
The combination of plateauing inflation and meager job growth should give the Federal Reserve ample room to cut interest rates at its next policy meeting in September. Stocks tend to rally as rate cuts become more likely, since lower borrowing costs can help fuel investment and reduce borrowing costs for businesses.
While the headline inflation numbers may be encouraging for rate cuts, several economists warned Tuesday that tariff-driven price increases may just be taking hold, especially with much of Trump's tariff agenda imposed after the period covered in the inflation report.
'Goods inflation heat is concentrated in tariff-affected products like household furnishings, apparel and new/used vehicles,' warned Callie Cox, chief market strategist at Ritholtz Wealth Management, in a Tuesday analysis.
'This shift in inflation prospects could be especially treacherous for investors, who are convinced we're getting a rate cut in September after a gross July jobs report.'
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