The Nasdaq Composite rose 155.24 points, or 0.60%, to 26,028.42 on July 14 as June inflation data came in cooler than expected, easing investor concerns about Federal Reserve rate hikes. The consumer price index rose 3.5% annually in June, down from 4.2% in May and below economists’ forecast of 3.8%, according to Reuters and the Bureau of Labor Statistics.
The lower-than-expected reading marked the first decline in five months and signaled a potential shift in the inflation trajectory. Gasoline prices fell 9.7% in June alone, the largest monthly decline since April 2020, pulling the broader energy index down 5.7%, according to the BLS. This energy-driven moderation accounted for most of the softening in the headline figure.
Core inflation, which excludes volatile food and energy categories, also cooled to 2.6% annually from 2.9% in May, beating economist expectations of 2.8%, according to Trading Economics. The moderation came after three consecutive months of increases that had pushed inflation to its highest level in more than three years in May.
The softer inflation print immediately shifted market expectations for Fed policy. Traders pared back expectations for near-term rate tightening, with the probability of a quarter-point rate increase at the Fed’s upcoming meeting falling sharply from 35% before the data to nearly 15% afterward, according to Reuters. CME Group’s FedWatch tool showed an 86% probability that the Federal Reserve would hold rates steady at its next meeting on July 29, per CBS News.
“After today’s benign core inflation release, it appears less likely that the FOMC will raise rates over the next few meetings,” said Jeffrey Roach, chief economist for LPL Financial, quoted in Reuters. “However, we may still be at an inflection point, given the risk that the energy shock could spill over into other categories of consumer prices.”
The Nasdaq’s recovery on the inflation data came after the index fell 1.6% on Monday amid broader market volatility. The tech-heavy index benefited particularly from the softer inflation outlook, as technology stocks rose 1.5% on the day, according to Reuters. The S&P 500 gained 16.16 points, or 0.22%, while the Dow fell 0.2%, showing a divergence in market reaction.
Experts cautioned that the June CPI figure does not yet reflect renewed US-Iran tensions that have since driven oil prices higher. Brent crude shot up to a one-month high of more than $86 a barrel on July 14 after President Trump announced a military blockade in the Strait of Hormuz, per CBS News. The national average for gasoline stood at $3.86 a gallon on Tuesday, down from a peak of more than $4.50 in May but still elevated compared to pre-war levels.
“Oil and gasoline prices—the main reason inflation eased in June—have started to edge back up on renewed US-Iran tensions, but the CPI won’t reflect this for another month,” said Nic Puckrin, a markets expert and former Goldman Sachs analyst, quoted by CBS News. Oxford Economics noted in a July 14 report that May may represent 2026’s peak inflation reading, given the decline in oil and gasoline prices through early July.
Sources
- Reuters — Nasdaq Composite gain of 155.24 points (0.60%) to 26,028.42; CPI at 3.5% vs. 3.8% forecast; Fed rate hike probability drop from 35% to 15%; Jeffrey Roach quote; tech sector gains.
- CBS News — June CPI at 3.5% vs. 4.2% in May and 3.9% forecast; gasoline prices fell 9.7%; core CPI at 2.6%; CME FedWatch 86% probability Fed holds; Nic Puckrin and Heather Long quotes; oil price spike and national gasoline average.
- Bureau of Labor Statistics — Gasoline index decreased 9.7% in June; energy index fell 5.7%; largest monthly CPI decline since April 2020.
- Trading Economics — Annual inflation rate fell to 3.5% in June, first decline in five months; core CPI at 2.6%.
- Fox Business — Energy prices fell 5.7% monthly; gasoline fell 9.7%; electricity down 1%.
