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Wall Street Optimistic as July Inflation Data Fuels Hopes of Fed Rate Pause

Wall Street looks to open on a high note as July's inflation data comes in milder than feared, stoking hopes that the Federal Reserve may pause interest rate hikes.

Wall Street sign
Wall Street sign

Optimism Over Unchanged Interest Rates

Wall Street was set to open higher on Thursday after milder-than-feared July consumer prices data fueled hopes the Federal Reserve could leave interest rates unchanged next month. The consumer price index (CPI) for July climbed 3.2% on an annual basis, less than the 3.3% rise expected by economists.

Analysis of the Consumer Price Index

Excluding volatile components such as food and energy, prices rose 4.7% in the 12 months to July compared with a 4.8% rise seen in the month before. Traders remain optimistic the Fed has completed its aggressive interest rate hike campaign, with bets on another rate hike in the remaining months of the year staying below the 30% mark after the CPI data.

Unemployment Figures and Trader Reactions

Separately, the number of Americans filing new claims for unemployment benefits rose by 248,000 last week, more than estimates of 230,000 additions. "It's one of those numbers right where they expect it to be," said Joe Saluzzi, co-manager of trading at Themis Trading. "The CPI is on the good path going down, overall, if I was the Federal Reserve then this is not a number that says I need to raise rates anymore."

Impact on Treasury Yields and Tech Giants

Taking some pressure off rate-sensitive mega cap names, the yield on the 2-year U.S. treasury note slid after the data. (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), and Apple (NASDAQ: AAPL) added between 0.6% to 1.1% before the bell.

Upcoming Fed Officials' Comments

Later in the day, investors will also parse comments from several Fed officials including Philadelphia President Patrick Harker, a voting member this year.

Nasdaq's Performance and AI Optimism

The tech-heavy Nasdaq led Wall Street lower on Wednesday, with heavyweight Nvidia (NASDAQ: NVDA) falling 4.7%. Nasdaq has gained about 31% this year on hopes of a soft landing for the U.S. economy in the face of the Fed's aggressive interest rate hikes and optimism over the scope of artificial intelligence.

Early Market Numbers

At 08:47 a.m. ET, Dow e-minis were up 138 points, or 0.39%, S&P 500 e-minis were up 20.25 points, or 0.45%, and Nasdaq 100 e-minis were up 115 points, or 0.76%.

Earnings Highlights

On the earnings front, Walt Disney (NYSE: DIS) rose 1.9% after beating Wall Street estimates for quarterly adjusted profit per share. Capri surged 57.4% after larger rival Tapestry (NYSE: TPR) said it would buy the Michael Kors parent in an $8.5 billion deal. Tapestry fell 5.9% after the announcement. U.S.-listed shares of Alibaba (NYSE: BABA) added 3.6% after the e-commerce conglomerate reported upbeat quarterly sales on the back of improved consumer sentiment.

Biden's Trade Policy Impact

Heightening trade worries, President Joe Biden on Wednesday signed an executive order that prohibits some new U.S. investment in China in sensitive technologies such as computer chips and requires government notification for investment in other tech sectors.