Sharp increase in US stock prices: Inflation figures brings optimism for reduced interest rates
US stocks experienced a significant surge on Tuesday, with key indexes responding positively to positive economic indicators and comments from Federal Reserve Chair Jerome Powell.
The Dow Jones Industrial Average closed at a record high of 44,449 points, marking an increase of 1.1% from the previous trading day. The S&P 500 followed suit, rising around 6,446 points, or 1.1%, at the close of trading in New York. The Nasdaq 100 also saw a notable increase, closing at around 23,839 points, marking a 1.3% rise.
The surge was primarily due to Powell's comments suggesting the possibility of upcoming interest rate cuts, which typically boosts investor confidence and market momentum. The release of stable inflation data further reinforced this positive sentiment by suggesting that inflation pressures remain under control, reducing the likelihood of aggressive rate hikes that could slow economic growth.
The core inflation rate in the US, excluding food and energy, increased to 3.1 percent in July from 2.9 percent in June. However, US inflation did not rise in July, remaining at 2.7 percent, which was lower than economists' expectations of a further increase.
The euro also strengthened during trading, with one euro costing 1.1675 USD and one dollar worth 0.8565 EUR. Gold prices saw a slight increase, with an ounce costing 3,347 USD (+0.1 percent). Oil prices, on the other hand, fell during trading, with a barrel of Brent crude costing 66.12 USD (-0.8 percent).
The broader market saw significant gains, with all major indices rising. The S&P 500's increase reflected broad-based investor confidence across multiple sectors following stable inflation readings. The Nasdaq showed improvement despite recent volatility, as tech-heavy stocks rallied on the prospect of lower borrowing costs and stable inflation.
The US Federal Reserve may consider unemployment figures and potential interest rate cuts to boost the US economy. The continued positive market sentiment suggests that investors remain optimistic about the economy's prospects, despite lingering concerns about inflation and global economic uncertainties.
Investors' optimism was fueled by the prospect of upcoming interest rate cuts, as suggested by Federal Reserve Chair Jerome Powell, which is usually beneficial for the finance sector. The anticipation of lower borrowing costs and stable inflation led to a surge in the S&P 500 and Nasdaq, with the latter showing improvement despite recent volatility.
