Market Gets Boost from Softer PPI Data as Traders Reassess Inflation Outlook

Today’s economic calendar delivered what bulls were hoping for: the latest PPI report came in lighter than expectations, sparking a modest rally across equities and providing some relief from inflation concerns. The S&P 500 edged up +0.14%, the Dow gained +0.29%, while the Nasdaq faced headwinds and dropped -0.14%. September E-mini S&P futures are up +0.15%, though E-mini Nasdaq futures remain slightly underwater at -0.03%.

What’s Driving the Market Today

The PPI report today is the star of the show. Both month-over-month and year-over-year readings came in softer than Wall Street anticipated, suggesting that tariff-driven inflation pressures haven’t yet materialized at the producer level. Specifically, June’s final-demand PPI held flat m/m and climbed +2.3% y/y—both below forecasts of +0.2% m/m and +2.5% y/y. Core PPI also surprised with an unchanged m/m reading versus the expected +0.2%, while the +2.6% y/y figure matched expectations. The year-over-year drop from May’s +2.7% to June’s +2.3% signals some easing in price pressures.

This favorable PPI data has reignited hope that the Fed might have more room to cut rates down the line. Futures are currently pricing in just a 3% chance of a -25 bp cut at the July 29-30 FOMC meeting, but expectations jump to 58% for the September meeting.

Beyond the PPI report, positive earnings from major banks provided additional support. Goldman Sachs posted a Wall Street record of $4.3 billion in equity-trading revenue, though the stock has since given back early gains. Bank of America’s trading division delivered a record quarter with better-than-expected net interest income, yet BAC is down -0.3%. Morgan Stanley also crushed on equity trading and wealth management metrics, but MS has retreated more than -2%.

Economic Data: Mixed Signals

Industrial production came in slightly stronger than expected at +0.3% m/m versus a +0.1% forecast, while manufacturing production matched expectations at +0.1% m/m. The New York Fed services business activity index improved to -9.3 from -13.2, pointing to some stabilization in the services sector.

However, don’t expect the Fed to pump the brakes on rate cuts just yet—today’s PPI report didn’t accelerate those expectations despite its favorable tone.

The Crypto Wild Card

Bitcoin is rallying +1.7% today, recouping some of Tuesday’s -3.3% slide, as President Trump convinced reluctant House Republicans to support stablecoin legislation. The President signaled he expects the House to pass the GENIUS Act stablecoin bill today. Bitcoin has surged over recent weeks on optimism around favorable crypto regulation from Washington, and today’s legislative push from the White House has traders watching this closely.

Crypto-exposed stocks are celebrating: Mara Holdings jumped more than +4%, Riot Platforms is up more than +3%, and Coinbase gained more than +2%.

Chip Sector Hits a Speed Bump

Not everything is smooth sailing. ASML crashed more than -10% after issuing cautious forward guidance, dampening enthusiasm for the semiconductor space that had rallied yesterday on hopes for loosened China chip export restrictions. The weakness spilled over to other chip names—Marvell Technology is down more than -5%, and Lam Research dropped more than -3%.

The Magnificent Seven are mixed today with four gainers and three losers, with Tesla leading the way up more than +2%, while the broader leadership remains fragmented.

Trade and Tariff Tensions Loom

The silver lining from favorable trade rhetoric—Treasury Secretary Bessent saying US-China talks are in a “very good place” and the new trade deal with Indonesia—has been overshadowed by negative headlines. Trump announced 30% tariffs on EU and Mexican imports effective August 1, raised Canadian product tariffs to 35%, slapped a 50% tariff on copper, and warned of up to 200% tariffs on drug companies that don’t relocate production domestically.

What’s Coming This Week

Earnings season is ramping up with focus on Q2 results. Expect key reports from PepsiCo, Abbott, US Bancorp, GE, Fifth Third on Thursday, followed by Schwab and American Express on Friday. The consensus calls for just +2.8% y/y S&P 500 earnings growth—the smallest increase in two years—with only six of eleven sectors projected to show earnings gains, the fewest since Q1 2023.

On the economic calendar: retail sales, initial jobless claims, Philadelphia Fed survey, NAHB housing index, housing starts, building permits, and the Michigan consumer sentiment index will all cross the wires.

Global Markets Taking a Step Back

Overseas bourses are slightly lower. The Euro Stoxx 50 shed -0.26%, China’s Shanghai Composite finished down -0.03%, and Japan’s Nikkei closed -0.04%. Treasury yields are supported by the PPI report with 10-year yields down -3.0 bp to 4.451%, while the 10-year breakeven inflation rate dipped -1.7 bp to 2.397%.

The Bottom Line: Today’s softer PPI report is exactly what traders needed after Tuesday’s mixed CPI data, providing breathing room for the risk rally. Watch for fresh tariff headlines and this week’s batch of earnings and economic data to drive the next leg of volatility.