June consumer prices fell 0.4% month over month, the first monthly decline in years, while headline inflation slowed to 3.5% from 4.2% in May. Core CPI was flat on the month and eased to 2.6% year over year. Much of that relief came from lower gasoline prices, but the broader takeaway is that inflation cooled more than expected and gave markets a reason to reassess the near-term path for rates.
Markets reacted quickly. Treasury yields moved lower, stock futures rose, and expectations for another Fed hike were scaled back. The Nasdaq led early gains, while traders cut the odds of a rate increase at the next Fed meeting sharply after the release.
For fixed income investors, this matters because softer inflation takes some pressure off the “higher for longer” narrative and can support bond prices, especially in Treasuries and other high-quality parts of the market. For equities, the report offers some support as well, particularly for growth sectors that are sensitive to changes in yields.
Sources: Wall Street Journal, Barrons, CNBC, Bureau of Labor Statistics
The views stated are not necessarily the opinion of Cetera Wealth Services, LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. Bonds - The return and principal value of bonds fluctuate with changes in market conditions. If bonds are not held to maturity, they may be worth more or less than their original value. Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.
Markets reacted quickly. Treasury yields moved lower, stock futures rose, and expectations for another Fed hike were scaled back. The Nasdaq led early gains, while traders cut the odds of a rate increase at the next Fed meeting sharply after the release.
For fixed income investors, this matters because softer inflation takes some pressure off the “higher for longer” narrative and can support bond prices, especially in Treasuries and other high-quality parts of the market. For equities, the report offers some support as well, particularly for growth sectors that are sensitive to changes in yields.
Sources: Wall Street Journal, Barrons, CNBC, Bureau of Labor Statistics
The views stated are not necessarily the opinion of Cetera Wealth Services, LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. Bonds - The return and principal value of bonds fluctuate with changes in market conditions. If bonds are not held to maturity, they may be worth more or less than their original value. Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.