Rate Cut Optimism May Lead To Continued Strength On Wall Street

The major U.S. index futures are currently pointing to a modestly higher open on Wednesday, with stocks poised to add to the strong gains posted in the previous session.

The markets may continue to benefit from optimism about an interest rate cut by the Federal Reserve following yesterday’s consumer price inflation data.

With the consumer price inflation data largely coming in line with economist estimates, the Fed is widely expected to lower rates by a least a quarter point next month.

U.S. Treasury Secretary Scott Bessent wants the Fed to keep the door open to a larger, 50 basis point rate cut next month following recent weak jobs data.

CME Group’s FedWatch Tool is currently indicating a 99.9 percent chance the Fed will cut rates by 25 basis points in September.

President Donald Trump also continues to pressure Fed Chair Jerome Powell to lower rates and recently threatened to allow a “major lawsuit” against him over renovations at the Fed’s headquarters to proceed.

However, overall trading activity may be somewhat subdued, with a lack of major U.S. economic data likely to keep some traders on the sidelines.

Reports on producer price inflation, retail sales, industrial production and consumer sentiment are likely to attract attention in the coming days.

After ending Monday’s choppy trading session moderately lower, stocks showed a strong move back to the upside during trading on Tuesday. The major averages more than offset the losses posted in the previous session, with the Nasdaq and the S&P 500 reaching new record closing highs.

The major averages ended the session near their best levels of the day. The Nasdaq surged 296.50 points or 1.4 percent to 21,681.90, the S&P 500 jumped 72.31 points or 1.1 percent to 6,445.76 and the Dow shot up 483.52 points or 1.1 percent to 44,458.61.

The strength on Wall Street came following the release of the Labor Department’s closely watched report on consumer price inflation in the month of July.

The Labor Department said its consumer price index rose by 0.2 percent in July after climbing by 0.3 percent in June. The modest increase matched expectations.

The annual rate of growth by consumer prices in July was unchanged from the previous month at 2.7 percent, while economists had expected the pace of growth to tick up to 2.8 percent.

The report also said the core consumer price index, which excludes food and energy prices, climbed by 0.3 percent in July after rising by 0.2 percent in June. The increase by core prices was also in line with estimates.

Meanwhile, the annual rate of growth by core consumer prices accelerated to 3.1 percent in July from 2.9 percent in June. Economists had expected the pace of growth to inch up to 3.0 percent.

Despite the faster than expected annual core price growth, traders seem to believe the data increases the chances the Federal Reserve will lower interest rates next month.

“Although the Fed supposedly focuses more on the core number than on the headline number (in order to strip out the noisier components of inflation), we don’t believe that this report will deter the Fed from cutting rates next month,” said Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management.

Airline stocks showed a substantial move to the upside on the day, with the NYSE Arca Airline Index soaring by 9.3 percent to its best closing level in five months.

Significant strength was also visible among semiconductor stocks, as reflected by the 3.0 percent surge by the Philadelphia Semiconductor Index.

Steel, housing, banking and computer hardware stocks also saw considerable strength, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are slipping $0.14 to $63.03 a barrel after sliding $0.79 to $63.17 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $3,408.50, up $9.50 compared to the previous session’s close of $3,399. On Tuesday, gold edged down $5.70.

On the currency front, the U.S. dollar is trading at 147.33 yen compared to the 147.84 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1707 compared to yesterday’s $1.1675.

Asia

Asian stocks ended mostly higher on Wednesday as in-line U.S. inflation data bolstered speculation the Federal Reserve will cut interest rates by 25 basis points in September, bringing forward its easing forecast amid fears of a weakening labor market.

U.S. Treasury Secretary Scott Bessent wants the Fed to keep the door open to a larger, 50 basis point rate cut next month following recent weak job growth revisions.

Chinese markets eked out modest gains as regulatory scrutiny of Nvidia chips spurred some optimism around the potential use of local alternatives.

The benchmark Shanghai Composite Index rose 0.5 percent to 3,683.46, with the upside capped by heightened trade tensions with Canada. China said it would implement more levies on Canadian rapeseed after an anti-dumping probe.

Hong Kong’s Hang Seng Index surged 2.6 percent to 25,613.67. Tencent Music Entertainment Group soared 15.6 percent after its second quarter revenues and profit beat estimates on robust subscriber growth in its online music services.

Japanese markets rose sharply to hit a fresh record high, extending the rally to a sixth straight session on tariff optimism and Fed rate cut hopes.

The Nikkei 225 Index hit an intraday high of 43,451.46 before closing up 1.3 percent at a record closing high of 43,274.67. The broader Topix Index settled 0.8 percent higher at 3,091.91.

Among the prominent gainers, Advantest, Renesas Electronics, Tokyo Electric Power and Yokohama Rubber surged 5-8 percent. Athletic apparel company Asics soared 18 percent after raising its full-year forecast.

Seoul stocks rallied, led by gains in the tech sector. The Kospi jumped 1.1 percent to 3,224.37, snapping a three-day losing streak on hopes for a U.S. rate cut. Samsung Electronics rose 1.1 percent and SK Hynix jumped 3.4 percent.

LG Display soared 22.5 percent on news of its victory in a trade secret infringement lawsuit against Chinese BOE.

Australian markets fell notably as focus shifted to earnings. The benchmark S&P/ASX 200 Index dropped 0.6 percent to 8,827.10, while the broader All Ordinaries Index closed 0.5 percent lower at 9,103.10.

Top power producer AGL Energy plummeted 13.1 percent after it reported a 21 percent drop in annual underlying profit.

Commonwealth Bank of Australia slumped 5.4 percent despite the country’s biggest lender posting strong earnings.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index finished marginally higher at 12,766.54, paring early gains.

Gold edged higher in Asian trading as the dollar weakened on rate cut expectations. Oil held a decline after the International Energy Agency said that global oil markets are on track for a record surplus next year.

Europe

European stocks have moved mostly higher on Wednesday as in-line U.S. inflation data cemented expectations of an interest rate cut by the Federal Reserve in September.

U.S. Treasury Secretary Scott Bessent wants the Fed to keep the door open to a larger, 50 basis point rate cut next month following recent weak job growth revisions.

In economic news, German consumer price inflation remained stable in July, as initially estimated, data from Destatis showed earlier today.

The consumer price index logged an annual increase of 2.0 percent in July, the same rate of rise as seen in June and matched the estimate published on July 31.

While the German DAX Index is up by 0.8 percent, the French CAC 40 Index is up by 0.5 percent and the U.K.’s FTSE 100 Index is up by 0.2 percent.

Tank gearbox maker RENK Group climbed 2.8 percent after posting stronger-than-expected second-quarter results.

Thyssenkrupp Nucera declined 2 percent after the hydrogen equipment supplier reported an unexpected quarterly loss.

E.ON rose over 1 percent. The energy utility company reaffirmed its annual adjusted earnings guidance after posting improved results for the first half.

Tour operator TUI gained 2.6 percent after beating its quarterly earnings forecast.
British homebuilder Persimmon tumbled 3.3 percent as it cautioned on market headwinds and budget uncertainty.

Beazley plummeted 9 percent after the insurer cut its full-year premium growth forecast.

Infrastructure contractor Balfour Beatty lost 3.6 percent despite reporting strong financial results for the first half of 2025.

Construction and infrastructure products group Hill & Smith soared more than 10 percent after posting robust first-half results.

U.S. Economic News

The Energy Information Administration is scheduled to release its report on crude oil inventories in the week ended August 8th at 10:30 am ET. Crude oil inventories are expected to dip by 0.8 million barrels after falling by 3.0 million barrels in the previous week.

At 1 pm ET, Chicago Federal Reserve President Austan Goolsbee is due to participate in a moderated question-and-answer session before a “Regional Insight, National Impact: a Monetary Policy Luncheon with the Chicago Fed” event hosted by the Greater Springfield Chamber of Commerce.

Atlanta Federal Reserve President Raphael Bostic is scheduled to speak on the economic outlook before an event hosted by the Atlanta Fed in partnership with the Franklin County Economic Development Authority at 1:30 pm ET.