Axios Markets

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πŸ’₯ Wake up. Yesterday's inflation print was a major league moment for markets. We get into it in today's newsletter, all in just 513 words, a 2-minute read.

1 big thing: With CPI in retreat, stocks hit 2023 highs

Data: FactSet; Chart: Axios Visuals
Data: FactSet; Chart: Axios Visuals

The key U.S. gauge of consumer prices showed the lowest level of inflation since early 2021, Matt writes.

Why it matters: The slowdown raises the prospect that the interest rate surge β€” which hammered stocks last year β€” may really be nearly over.

By the numbers: Overall inflation in June was just 3% compared with the same month last year.

  • Prices were still rising, but at the slowest pace since March 2021 β€” and June's price gains were smaller than analysts had expected.

State of play: Stocks rose broadly β€” if unspectacularly β€” on the report, posting their best day of the month.

  • The S&P 500 increased 0.7%.
  • The interest-rate-sensitive Nasdaq composite index rose 1.2%.
  • The Russell 2000 index of small-capitalization stocks β€” sensitive to the short-term outlook on U.S. domestic growth β€” climbed 1.1%.

The bottom line: The day's good inflation news left the stock market sitting at its highs for the year β€” the S&P is up 16.5% in 2023.

  • We're now less than 7% from a new all-time high, the traditional mark that stock mavens say confirms the birth of a new bull market.

2. πŸ“‰ Charted: CPI slide

Data: U.S. Bureau of Labor Statistics; Chart: Axios Visuals
Data: U.S. Bureau of Labor Statistics; Chart: Axios Visuals

3. πŸ—£ What they're saying: "Final innings"

Falling inflation means the Fed is almost finished raising rates.

  • "Today’s report is consistent with our view that Fed tightening is in its final innings," Goldman Sachs analysts wrote.
  • "Most indicators of pipeline pressures β€” PPI, import prices, supplier deliveries β€” suggest goods price inflation should remain tame in coming months," wrote JPMorgan economists.
  • "Today’s CPI report, while really only the first of what we anticipate will become a trend toward closer to target levels of inflation, is clearly a move in the right direction," wrote bond market analysts at BlackRock.

4. πŸ˜• Yes, but: Don't expect parades

Data: U.S. Bureau of Labor Statistics; Chart: Axios Visuals
Data: U.S. Bureau of Labor Statistics; Chart: Axios Visuals

Inflation might be slowing, but prices are still high β€” and rising.

The big picture: There's still inflation. Prices are just rising at a more moderate pace compared to the last couple of years.

Context: Much of the underlying collapse in inflation over the last year reflects the plunge in energy prices.

  • Excluding energy and food prices, inflation slowed in June to 4.8% β€” down from 5.3% in May β€” but that's still a lot higher than the 3% annual pace for the overall index.

Flashback: Remember, last June was when average U.S. gasoline prices hit the never-before-seen level of $5 per gallon.

  • Nationwide, they're about 30% lower now, at $3.50 a gallon.

The bottom line: Americans are still under quite a bit of price pressure for key costs of living.

  • Most notably, housing affordability is hitting some of the lowest levels on record, as a lack of supply keeps home prices out of reach for many.
  • Inflation in shelter costs inched lower in June but still rose at a painful 7.8% annual rate β€” as the chart above shows.

5. Catch up quick

πŸ‘€ FTC to appeal the court ruling that paved the way for Microsoft to close its Activision deal. (Axios)

🎬 Hollywood actors' strike looms as talks collapse. (NYT)

✈️ Delta says travel boom produced record revenue; hikes full-year outlook. (CNBC)

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Today's Axios Markets was edited by Kate Marino and copy edited by Mickey Meece.