U.S. stocks closed higher on Aug. 12, with the broad S&P 500 and tech-laden Nasdaq notching record highs after a tame inflation report fueled rate cut bets.
Annual July inflation rose 2.7%, compared with forecasts for an uptick to 2.8% and even from June’s 2.7%. However, the so-called core, excluding the volatile food and energy sectors, rose 3.1%, compared with expectations for 3%.
Economists said they’ve seen some signs of tariff costs passing through to consumers, though not yet in significant ways.
“There is some sign of tariff pass through to consumer prices but, at this stage, it is not significant enough to ring alarm bells,” said Seema Shah, chief global strategist at Principal Asset Management.
The inflation report stoked speculation the Federal Reserve will lower interest rates at its next policy meeting in September. The CME FedWatch tool that tracks the odds the markets put on a rate move at each Fed policy meeting shows a more than 94% chance of a rate cut, up from about 85% before the inflation report was released.
“Although core annual inflation is back to its highest level since February, today’s (inflation) print is not hot enough to derail the Fed from cutting rates in September,” Shah said.
After the July employment report released on Aug. 1 showed weaker-than-expected jobs growth, markets aggressively began to price in rate cuts. Lower interest rates make borrowing less expensive, which fuels business investments and consumer spending needed to boost the economy.
However, some economists say a September rate cut still isn’t a sure bet.
The Fed’s “likely to remain on hold until it’s clear the (tariff) pricing pass-through is a one-time effect before cutting rates,” said Joe Brusuelas, chief economist at consulting firm RSM. He forecasts one rate cut this year, but not until December when the inflation picture may be clearer.
The blue-chip Dow rose 1.1%, or 483.52 points to 44,458.61; the S&P 500 added 1.13%, or 72.31 points, to 6,445.76 and the Nasdaq gained 1.39%, or 296.50 points, to 21,681.90. The benchmark 10-year yield rose to 4.289%.
Before the open on Aug. 13, investors will get another glimpse of inflation effects but through the eyes of businesses instead of consumers. July’s producer price index reflects increases in prices business pay for their goods and services.
President Donald Trump on Aug. 12 again demanded on his Truth Social platofmr that Fed Chair Jerome Powell lower rates.
In the same social media post, he also said he was considering allowing “a major lawsuit against Powell to proceed because of the horrible, and grossly incompetent, job he has done in managing the construction of the Fed Buildings.”
Companies continue to add Bitcoin to their corporate coffers. Japan’s Metaplanet and the United Kingdom’s The Smarter Web Company, added almost $100 million worth of Bitcoin to their corporate treasuries.
Metaplanet said it had purchased 518 Bitcoin for about $61.4 million at an average price of $118,519 per coin. It brings its total holdings to 18,113 Bitcoin, worth about $2.15 billion at current prices, and acquired at an average of $101,911 per Bitcoin.
Smarter Web bought 295 Bitcoin for 26.3 million pounds ($35.2 million) at an average of $119,412 each to bring its total holdings to 2,395 Bitcoin valued at about $284.8 million at current prices.
Bitcoin was last up 0.78% at $119,649.70.
(This story was updated with new information.)
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.