The stock market rallied Tuesday as cooler-than-expected inflation data eased concerns about future interest rate increases. The S&P 500 rose 0.4% and the tech-focused Nasdaq Composite climbed 0.9%, with technology stocks leading the gains.
The June Consumer Price Index came in at 3.5% annually, below the 3.8% forecast, according to data released Tuesday morning. The monthly reading fell 0.4%, the largest one-month decrease since April 2020, driven by a sharp drop in energy prices, CNBC reported.
Core inflation, which excludes food and energy and is the Federal Reserve’s preferred measure, fell to 2.6% in June, according to Advisor Perspectives. Energy prices dropped 5.7% from May, providing relief to consumers and shifting market sentiment about the Fed’s next moves.
Cooler inflation readings typically support lower interest rate expectations, which can boost equity valuations, especially for growth-heavy sectors like technology. Charles Schwab noted that the softer inflation data gave markets confidence that the Fed would hold rates steady rather than pursue additional increases.
The rally underscores how sensitive markets have become to inflation data in 2026. Earlier this year, stronger-than-expected price pressures had triggered selloffs, while signs of moderating inflation have sparked relief rallies. The June reading suggests the disinflationary trend that began in 2024 remains intact, despite earlier concerns about sticky price growth.
Sources
- CNBC — June CPI inflation data, energy price declines, and market reaction
- Wall Street Journal — June CPI at 3.5%, below 3.8% forecast, energy price relief
- Investopedia — S&P 500 and Nasdaq percentage gains on July 14
- Advisor Perspectives — Core inflation at 2.6% in June
- Charles Schwab — Market expectations for Fed rate decisions
- Anchorage Daily News — S&P 500 and Nasdaq closing levels
