Benign US Inflation Data Drives Stock and Bond Gains as Fed Pressure Eases
Market Reactions and Key Financial Developments
By Jamie McGeever
Stock and Bond Market Rally
ORLANDO, Florida, Aug 13 (Reuters) - Stocks and bond prices rose on Thursday, with the S&P 500 barreling to a fresh high, as investors cheered another relatively benign snapshot of U.S. inflation that reduces the pressure on the Federal Reserve to raise interest rates.
Gold's Revival Amid Uncertainty
In my column today, I look at what's driving gold's revival. Uncertainty around the U.S. rate outlook, Fed independence and credibility, just as the U.S.-Iran war is flaring up again, has drawn investors back to gold, especially one group — central banks.
Recommended Reads for Further Insight
If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.
Top Articles
1. U.S. producer prices unchanged in July, further dimming rate hike odds
2. AI creeps onto Fed radar, but footprint is small so far: Mike Dolan
3. EXCLUSIVE-Microsoft retreats in China, but AI boom helps it keep a window open
4. AI boom is starting to show in UK economy's performance
5. Rate hike bets leave yen's post-intervention gains at BOJ's mercy
Today's Key Market Moves
Global Stock Performance
• STOCKS: South Korea +3.6%, set to snap 7-week losing streak. UK -0.5%. S&P 500 +0.7% to new high, Nasdaq +0.8%.
Sector and Share Highlights
• SECTORS/SHARES: Seven sectors on the S&P 500 rise, four fall. Comms services +1.6%, materials -0.7%. Workday +18%, Sandisk +13%, Netflix +5%. Tapestry -16%, Cisco Systems -8%.
Currency and Bond Market Updates
• FX: Dollar little-changed vs majors, USD/JPY still eyeing 160. Colombian peso biggest gainer, +0.8%.
• BONDS: U.S. 30-year auction on the soft side, yield highest since the 2000s, as expected.
Commodities and Metals
• COMMODITIES/METALS: Oil -2%, gold -1%.
Today's Talking Points
Inflation Data and Fed Outlook
Battle Lines Drawn
If you were hoping this week's CPI and PPI reports would give some degree of clarity on the U.S. inflation outlook, you'd be disappointed. Both were relatively benign, especially the PPI data, raising the likelihood that the Fed sits on its hands a little bit longer. A rate hike isn't fully priced now until December.
Comments from two Fed officials on Thursday reflected the "hawkish" and "wait-and-see" camps at the central bank. Cleveland Fed President Beth Hammack repeated her view that rates should be raised now if inflation is to finally get back to target, while Richmond Fed President Thomas Barkin said the labor market is vulnerable and inflation may already be drifting lower on its own. Paralysis or pause? Markets don't seem to care — stocks and bonds are on the up.
Corporate Developments
Another OpenAI Departure
OpenAI's chief revenue officer Denise Dresser is leaving less than a year after joining, "to pursue other opportunities." She will be replaced by Dali Rajic, who joins from Wiz, and brings "deep expertise in running disciplined, metrics-led revenue organizations that scale globally and selling to both large enterprises and technical customers," OpenAI said on its website.
Investors may be wondering, with a potential $1 trillion IPO in the pipeline, why Dresser is leaving after barely eight months in the job. They will also note that the announcement of her departure comes two days after senior executive Brad Lightcap said he would leave the company.
UK Economic Performance
Brit-pop Higher
Britain's economy unexpectedly grew in June, boosted by the World Cup, hot weather and respite from the Middle East energy shock. The leap in June meant GDP rose by 0.4% in the second quarter, following 0.6% in the first. This means Britain is on course for the strongest growth in the G7 over the first half of the year.
Will this continue into the second half of the year? Unlikely. SocGen's Sam Cartwright forecasts just 0.1% average Q/Q growth in the second half, which would leave 2026 GDP at 1.1%. JPMorgan's Allan Monks is slightly more optimistic, saying risks to Q3 growth lie to the upside, especially if PMIs sustain their recent improvement.
Upcoming Market Movers
Key Data Releases to Watch
What could move markets tomorrow?
• Taiwan GDP (Q2, revised)
• Germany producer price inflation (July)
• Euro zone GDP (Q2, flash estimate)
• U.S. retail sales (July)
• U.S. University of Michigan consumer, inflation expectations (August, prelim)
Newsletter and Disclaimer
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(Reporting by Jamie McGeever; Editing by Nia Williams)
