In the dead of night, after a 3-hour run of consecutive gains, the cheers suddenly stopped

—Last night, the market chose to believe the data first; over the next few days, it will have to answer another question: will it trust oil prices again?

Financial markets welcomed more cheers:
- US stocks rose across the board: the Dow Jones rose 0.02%, the S&P 500 rose 0.38%, and the Nasdaq rose 0.9%;
- Gold rebounded, briefly touching $4,100 intraday, but ultimately closed around $4,050;
- The US dollar index fell sharply intraday, but recovered nearly half of its losses by the close;
- Oil prices continued higher, with US crude edging toward $80;
- US Treasuries rebounded: the yield on the 10-year US note fell below 4.60% and closed at 4.58%.

First, the market once again showed the classic pattern of “a falling dollar, everything rises.” Clearly, what the market is trading is “declining rate-hike expectations”—the probability of a rate hike in July has already dropped to 16%. As the dollar broke below 101 and the 10-year yield slipped below 4.60%, the alert was downgraded to a warning—because there’s still some distance before both confirm a trend reversal.

Second, the US June CPI data is already out—broadly below market expectations, and even core inflation came in unexpectedly lower than expected. This is the most satisfying inflation print in recent months, yet the market didn’t show the same level of excitement. The rise in US stocks doesn’t match it: the Dow Jones barely moved higher, and the Nasdaq’s gain is also less than 1%.

One more detail worth watching—gold surged and then pulled back. It once moved up to $4,100, then closed lower at $4,050. After the CPI release, gold kept rising for three straight hours before turning lower. The market is not blindly optimistic: on one hand, the recent deterioration in the Middle East has reduced some of the relevance of the June data; on the other hand, it’s hard to read a “dovish tone” from Fed Chair Waller’s remarks last night—market pricing for a September rate hike is still close to 60%.

Many media outlets are likely to misread it. They might say, “CPI cools, and the Fed is reassured.”
Actually, no. Waller emphasized again today: Inflation is a choice (inflation is not a natural disaster—it’s a policy choice).

Third, the biggest change on Tuesday is not any single asset’s rise or fall, but that the market has returned to “data pricing,” with data becoming the market’s “top explanatory variable” again.

Over the next few days, you need to repeatedly watch three variables:
Whether oil prices can truly hold above $80, and whether energy risk continues to transmit into inflation;
Whether the 10-year Treasury yield returns above 4.6% to verify whether the bond market has changed its view;
Whether the US dollar index ends its correction and strengthens again.

If all three move upward together, then the optimistic sentiment brought by CPI may just be a brief pause. If they don’t move in the same direction, the market may have a chance to continue along the main line of “inflation cooling, risk appetite picking up.”

Last night wasn’t the end—it was a new choice of direction.

Risk warning: This article is based only on publicly available information and market data for analysis and exchange of information. It does not constitute any investment advice or any promise of returns. Financial markets involve risk. Investment decisions should be made independently based on one’s own circumstances.