S&P500 and Nasdaq: Records Set as CPI Data Clears the Way for a Fed Rate Cut

S&P 500 and Nasdaq Set New Highs as CPI Cooldown Lifts Rate Cut Hopes

Markets got the green light Tuesday, and they didn’t hesitate. Both the S&P 500 and Nasdaq tagged fresh all-time highs after July’s CPI report came in a hair cooler than expected—just enough to boost the odds that the Fed might finally blink and cut rates next month.

The S&P climbed 1.13% to 6,445.76 and the Nasdaq tacked on 1.39% to finish at 21,681.90. Even the lagging Dow got in on the action, adding 483 points. The short version? Inflation didn’t run hot enough to scare the Fed, and the smart money jumped on that with both feet.

Did Inflation Really Cool Enough to Nudge the Fed?

Look, it wasn’t a massive miss, but it was soft enough to matter. Headline CPIrose 2.7% year over year—just under the 2.8% forecast. Core CPI, which trims out food and energy, ticked up 3.1%—a hair hotter than the 3% estimate. Not ideal, but still manageable. Bottom line: the market’s takeaway is that it’s not hot enough to keep the Fed from easing.

CME’s FedWatch tool now pegs the odds of a September cut at 94%, up from 85% before the report dropped. Traders also upped their bets for more cuts later this year. The Fed’s still playing it close to the vest, but the setup for September is looking better by the day.

What Stocks and Sectors Led the Charge?

Small caps ripped higher, with the Russell 2000 outperforming the big indexes—no surprise there. When rates fall, borrowing gets easier, and small names tend to benefit most.

Airlines caught fire too, with United Airlines blasting 10% higher. Spirit’s bankruptcy worries sent a message: less competition means fatter margins. Plus, airfares jumped in the CPI data, so pricing power is real.

Tech stayed red-hot. Meta jumped 3.15%, Lam Research climbed 3.2%, and Nvidia stayed firm. SE stock absolutely exploded—up 19% on strong earnings and breakout-level sales growth. Traders saw it and pounced.

Plenty of names are flashing buy signals: Meta, Goldman Sachs, Capital One, Las Vegas Sands… the list keeps growing. And the setups are clean—either reclaiming moving averages or breaking out of consolidations.

What Are Charts Telling Us Now?

Technically, we’re still grinding higher, and momentum’s hard to bet against. The S&P has cleared its prior ceiling and is working off some of the excess from last week’s tight range.

The Nasdaq looks extended but hasn’t signaled a reversal. If anything, buyers keep stepping in on dips.

I’m watching that 6,385 level on the S&P as a short-term floor. If it holds, bulls stay in charge. Above that, there’s not much resistance—just open air.

So, Where Do We Go From Here?

We’ve got the PPI report coming Thursday and Jackson Hole lurking at the end of the month. Those are the next big catalysts. But right now, the market wants to believe the Fed has a green light to ease. As long as inflation data doesn’t surprise to the upside and earnings stay firm, bulls have the upper hand.

That being said, we’re entering a seasonally shaky stretch. August and September aren’t known for smooth sailing. But again, with rate cut odds rising and earnings surprising to the upside, dips could be buying opportunities. We’ll see how that plays out.

More Information in our Economic Calendar.