Both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) closed well in the green following a better-than-expected Consumer Price Index (CPI) update. The pair of ETFs also secured new intraday all-time highs on Tuesday.
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The market received an early-morning boost after July’s CPI increased by 0.3% month-over-month and 2.7% year-over-year. The monthly rise matched the consensus estimate while the yearly rise came in below the estimate for 2.8%. However, core CPI, which excludes volatile food and energy prices, increased by 0.3% for the month and 3.1% annually. Economists were expecting a monthly and yearly rise of 0.3% and 3.0%, respectively.
Following the CPI update, the odds of a 25-bps rate cut during the September 16-17 Federal Open Market Committee (FOMC) meeting jumped to 94.4% compared to 85.9% a day ago and 92.9% a week ago. At the same time, the Fed now needs to decide if a higher-than-expected core CPI figure is compelling enough to keep rates steady.
“Jerome “Too Late” Powell must NOW lower the rate,” said President Trump in a Truth Social post on Tuesday. Trump added that he was considering a “major lawsuit” against Powell over the Fed’s controversial renovation of its Washington, D.C. headquarters. He alleged that the renovation cost $3 billion when it should have cost $50 million.
The race to replace Powell is heating up ahead of the expiration of his term in May 2026. On Monday, the Wall Street Journal reported that former St. Louis Fed President James Bullard and Marc Sumerlin, who served as an economic adviser to former President George W. Bush, are now under consideration. Today, Politico said that Fed Vice Chairs Philip Jefferson and Michelle Bowman and Dallas Fed President Lorie Logan are being considered as well.
Meanwhile, the U.S. deficit in July grew by 19%, or $47 billion, to $291 billion, above the estimate for a $215 billion deficit. That comes despite Trump’s sweeping tariffs on trading partners across the world. Receipts increased by 2% to $338 billion, while outlays increased by 10% to $630 billion, a record high for July. For the first 10 months of the fiscal year, both receipts and outlays secured record highs, totaling $4.347 trillion and $5.975 trillion, respectively.
The S&P 500 (SPX) closed with a 1.14% gain while the Nasdaq 100 (NDX) returned 1.33%.
