Wall Street hits fresh highs as July inflation data boosts Fed rate cut bets; tech leads, dollar weakens, bond volatility sinks, global markets gain.

Wall Street Hits Records as Fed Rate Cut Hopes Strengthen

Global financial markets started the week on a bullish note after U.S. July inflation data suggested no fresh tariff-driven price spikes — and that was enough to reinforce expectations for Federal Reserve interest rate cuts, lifting stocks to new all-time highs.

The S&P 500 and Nasdaq Composite each surged more than 1% on Tuesday, while futures trading early Wednesday pointed to further gains. The VIX volatility index dropped to its lowest reading of the year, signaling investor confidence.

Bond Market Calm and Dollar Weakness

Bond market volatility plunged to its lowest level in over three and a half years, even as core inflation edged back above 3% for the first time in five months. U.S. Treasury yields fell across maturities, and the U.S. dollar index hit a two-week low.

Fed Policy Expectations Intensify

Futures markets are now fully pricing in a 0.25 percentage point rate cut at the Fed’s September meeting, with traders assigning nearly a 50% probability of three cuts before year-end.

• Treasury Secretary Scott Bessent suggested the Fed might cut rates by 0.50% next month to “make up for the delay.”
• President Trump renewed criticism of Fed Chair Jerome Powell, accusing him of being slow to act, and hinted at legal action.

Tech Stocks Lead the Rally

Tech names drove Tuesday’s gains:

• Alphabet rose 1.2% after Perplexity AI made a $34.5 billion all-cash offer for the Chrome browser, aiming to gain access to billions of users.
• Intel jumped 5% after a White House meeting between Trump and CEO Lip-Bu Tan, whom Trump praised despite prior criticism.

Global Markets Follow Wall Street Higher

• Japan’s Nikkei hit a record high, supported by strong corporate earnings.
• European equities also advanced, while Asian markets stayed broadly positive.

Investors are now turning attention to the U.S.-Russia summit in Alaska on Friday, which could bring developments on a potential Ukraine ceasefire.

Other Market Headlines

Geopolitics and Supply Chain Security

U.S. authorities have begun placing tracking devices in shipments of advanced chips at risk of diversion to China.

Currency Markets

Latin American currencies have outperformed the U.S. dollar this year, defying broader market expectations.

China’s Economic Challenge

Overcapacity in domestic markets has sparked price wars and deflationary pressures. The government’s “anti-involution” initiative aims to stabilize prices, but recovery may take time.

Clean Energy Slowdown

The pace of new U.S. solar, wind, and battery capacity has slowed this year, impacting sector sentiment, though growth continues outside major hubs like Texas and California.

Expert Insight

“The combination of easing inflation pressures, dovish Fed expectations, and resilient corporate earnings has created an environment where equity markets can keep pushing higher,” said Elena Brooks, chief strategist at Horizon Capital. “But geopolitical risks and potential policy surprises remain critical watchpoints.”

Investor Takeaways

1. Fed Path in Focus: Markets are pricing in aggressive easing by year-end.
2. Tech Momentum: AI and semiconductor sectors continue to lead gains.
3. Geopolitical Watch: U.S.-Russia talks and China’s policy responses could shape Q4 sentiment.

FAQs

Q: Why are markets rallying despite core inflation ticking up?
A: Investors believe the Fed will prioritize growth and financial stability over modest inflation increases.

Q: What is “anti-involution” in China?
A: A government-led program to curb excessive competition and stabilize prices.

Q: Why is the VIX at yearly lows?
A: Reduced uncertainty over Fed policy and steady earnings have calmed volatility expectations.