Wall Street Extends Gains as Fed Cut Bets Surge on Softer CPI Data
U.S. equity benchmarks powered higher Tuesday, with the S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) logging intraday records after July’s Consumer Price Index showed a 2.7% annual rise, marginally softer than forecasts of 2.8%. The Dow Jones Industrial Average (^DJI) advanced 468 points (+1.1%) to 44,424, while the S&P 500 climbed 0.9% to 6,434 and the Nasdaq gained 1.1% to 21,613. Core CPI, stripping out food and energy, rose 3.1% year-on-year, slightly hotter than the 3% consensus but viewed by traders as non-threatening to imminent rate cuts. The CME FedWatch Tool reflected a 94% probability of a September cut, with market-implied odds of three cuts by year-end crossing 50%.
Small-cap stocks outperformed, with the Russell 2000 (RUT) surging 2.25% to 2,266.44, benefiting from rate-sensitive positioning. The S&P 500 Financials Sector Index rose 1.18%, supported by lower-yield expectations. Long-dated Treasury yields, however, nudged higher — the 10-year at 4.30% and the 30-year at 4.89% — amid lingering inflation concerns.
Mega-Cap Tech Leads, META Nears $2 Trillion Valuation
Meta Platforms (META) soared 3.51% to $792.74, driving toward a $2 trillion market cap after surpassing $1.99 trillion. Gains followed its Q2 earnings beat and strong adoption of its Threads platform, now at 400 million monthly actives. Other large-cap techs rallied, aided by institutional flows — Bank of America data showed $4.3 billion in net stock purchases by its clients last week, the largest in two years.
Nvidia (NVDA) closed at $182.57 (+0.23%) despite trade-related headwinds, as President Trump granted a 90-day extension on certain China tariffs and indicated potential approval for a downgraded Blackwell chip export. Intel (INTC) rose 3.56% to $21.39 after Trump praised CEO Lip-Bu Tan, reversing earlier calls for his resignation.
Tariffs and Political Theatre Continue to Shape Market Tone
Trump’s trade maneuvering dominated headlines, from pausing punitive tariffs to publicly berating Goldman Sachs (GS) CEO David Solomon for earlier recession forecasts tied to “Liberation Day” tariff announcements. Goldman now projects the S&P 500 ending 2025 at 6,600, up from a pessimistic 5,700 target set during spring volatility.
Cannabis equities staged explosive moves, with Tilray Brands (TLRY) up 10.76% to $1.02, extending a two-day rally exceeding 50% after Trump hinted at reclassifying marijuana as a Schedule III substance. Ancillary players like Trulieve (TCNNF) (+38%) and Canopy Growth (CGC) (+26%) joined the surge.
Earnings Drive Single-Stock Volatility
Earnings season’s late-cycle reports sparked sharp moves. Circle Internet Group (CRCL) advanced 3.20% to $166.32 after a 53% YoY revenue increase to $658 million, fueled by USDC circulation growth of 90%. On Holding (ONON) jumped 7.92% to $49.34 after a 38.2% YoY sales beat and raised full-year guidance despite facing 40% U.S. tariffs on Vietnamese imports.
Conversely, BigBear.ai (BBAI) plunged 21.74% to $5.55 after cutting its 2025 revenue forecast to $125–$140 million from $160–$180 million, citing federal contract disruptions. Plug Power (PLUG) slid 7.52% to $1.48 after a wider-than-expected Q2 loss of $0.20 per share despite 21% revenue growth to $174 million.
Sector and Commodity Movers
The SPDR S&P Metals & Mining ETF (XME) hit its highest level since 2008, up 2.26% to $80.48, led by Alcoa (AA) (+6%) and Cleveland-Cliffs (CLF) (+5%). Japan’s Nikkei 225 (^N225) closed 2.15% higher at a record 42,718.17, aided by chip demand after Micron (MU) raised guidance.
In commodities, gold (GC=F) steadied after Trump confirmed Swiss bars would not face tariffs, removing a recent source of market whiplash.
Institutional and Retail Flows Align
Institutional flows now mirror the aggressive dip-buying seen from retail investors earlier this year. Bank of America’s client data ranks last week’s inflows into single stocks among the 10 largest since 2008. Large-cap tech remains the preferred destination, a pattern reinforced by earnings beats and a macro backdrop leaning toward Fed easing.
Market Outlook and Positioning Call
With CPI data reinforcing a September rate cut narrative, equity sentiment remains bullish across major indices. The combination of strong Q2 earnings — S&P 500 EPS growth at 11.8% YoY — and a 22.1 forward P/E above historical averages suggests valuations are stretched but sustainable if monetary easing proceeds. Rate-sensitive small caps and financials may continue outperforming into September’s FOMC, while large-cap tech retains leadership.
Verdict: Current momentum, coupled with Fed cut probabilities above 90%, tilts the near-term bias bullish. Allocation remains a Buy for S&P 500, Nasdaq Composite, and selective large-cap tech, with small-cap exposure favored ahead of anticipated easing. Tariff volatility remains the key risk variable.
