To The Moon

Inflation Data and Federal Reserve Outlook

June CPI Report: US inflation cooled significantly in June, rising just 3.0% year-over-year, below economists' forecast of 3.1%. Month-over-month, prices fell for the first time since May 2020.

June CPI 3%

CPI

Treasury Yields Reaction:The data led to a decline in Treasury yields, as investors renewed confidence that the Federal Reserve might cut interest rates at least twice this year. Chicago Fed President Austan Goolsbee termed the CPI data as "excellent," indicating confidence that the Fed is on a path to achieve its 2% inflation target.

• Global Central Bank Actions

European Central Bank (ECB): Measured Approach:** A Bloomberg survey indicates that the ECB will take a cautious approach to lowering rates amidst political risks that could affect inflation's return to 2%.

Stock Market Dynamics

• Big Tech Rotation: Cooling US inflation triggered a rotation out of Big Tech stocks, with investors selling off the "Magnificent 7" stocks ( $Apple(AAPL)$ , $Microsoft(MSFT)$ , $NVIDIA Corp(NVDA)$ , Alphabet, Amazon.com, Meta Platforms, Tesla). The Nasdaq 100 dropped 2.2%.

7MAG

• Tesla $Tesla Motors(TSLA)$ postponed its robotaxi unveiling from August to October, leading to an 8.4% drop in its stock, the largest since January. This decision benefited competitors like Uber and Lyft, whose shares surged.

- Despite the sell-off in tech stocks, the S&P 500 Equal Weight Index rose 1.1%, reflecting a broader market strength. Out of the S&P 500 stocks, 394 rose while 106 declined.

$RSP

$RSP

- The tech-heavy Nasdaq Composite fell nearly 2%, marking its worst performance since April, and the S&P 500 dropped 0.9%.

Upcoming Events

- Second-Quarter Earnings: Major banks like $JPMorgan Chase(JPM)$ Chase, Citigroup, and Wells Fargo will begin reporting their second-quarter earnings. Analysts expect S&P 500 companies to show profit growth of 8.8%, the highest since Q1 2022.

- Producer Price Index (PPI) for June: The Bureau of Labor Statistics is set to release the PPI, with consensus expecting a 0.1% increase month-over-month and a 2.3% year-over-year rise.

- Consumer Sentiment Index: The University of Michigan will release its Consumer Sentiment Index for July, with expectations for a reading of 68.5, similar to June’s.

Conclusion

The market landscape is characterized by a significant cooling of inflation, which has renewed hopes for Fed rate cuts. However, this has led to a sell-off in major tech stocks, reflecting the market's heavy reliance on these names. As we move forward, investors will closely watch the Fed’s decisions, second-quarter earnings, and upcoming economic reports to gauge the broader market direction…

This report is for informational purposes only and does not constitute financial advice. Investing in financial markets involves risk, and you should consult with a qualified financial advisor before making any investment decisions. The information contained herein is based on sources believed to be reliable but is not guaranteed for accuracy or completeness.

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