WARNING: INFLATION IS ABOUT TO RISE AGAIN...
In a Nutshell
Markets rallied on cooler-than-expected CPI data driven by June's sharp oil price drop after the ceasefire, but oil is already rebounding in July with the Strait of Hormuz still closed, setting up higher inflation readings next month. IBM crashed 25% on weak earnings and guidance, while semis rebounded as markets trade sideways with no clear direction. Traders should watch oil-driven inflation risks and consider staying in cash rather than forcing trades in uncertain conditions.
These notes were generated by AI and may contain inaccuracies.
Markets are incredibly volatile today due to the CPI data report. The NASDAQ is up 1% and was already in the green prior to the report release. Market participants were anticipating CPI to come in much lower than expected. Some voices claimed the report was rigged or manipulated, but oil price data supports the reported decline.
Oil prices dropped significantly in June. UCO traded around 47 early to mid-June after peaking in May, then fell to lows of 31 from highs of 50. Oil has been one of the biggest contributors to the inflation rate, especially during the ramp-up caused by Middle East conflict and the closure of the Strait of Hormuz. Month-over-month, oil has driven the largest gap-ups in inflation readings. The June retracement in oil prices was therefore expected and explains why CPI came in better than forecasted.
The improvement is attributed to the ceasefire that emerged in June, which allowed oil prices to drop. Credit given to the new Fed chair is misplaced because the chair took no action. The decline simply tracked the ceasefire and lower oil prices. Anyone with access to a trading platform could see oil prices falling in real time.
The overall CPI report showed a 4% decrease, moving from 4.2% down to 3.5%. Core CPI fell from 2.9% to 2.6%. Both headline and core readings came in lower than expected, representing a success for markets. Markets have every right to celebrate the data.
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