U.S. stock futures experienced a significant surge on Wednesday following the release of the consumer-price index (CPI) for June, which indicated the smallest increase in prices since August 2021. At the same time, Treasury yields and the U.S. dollar declined as traders' expectations for another interest-rate hike later this year diminished.

Stock Market Performance

  • S&P 500 futures (ES00, +0.77%) rose by 35 points, or 0.8%, reaching 4507.25.
  • Dow Jones Industrial Average futures (YM00, +0.59%) increased by 189 points, or 0.6%, reaching 34653.
  • Nasdaq 100 futures (NQ00, +0.99%) climbed by 141 points, or 0.9%, reaching 15402.

Impact on Treasury Yields and Exchange Rate

Following the release of the CPI data, Treasury yields, especially those on the short end of the curve, experienced a decrease. The 2-year yield dropped by 14 basis points to 4.750%. Simultaneously, the euro (EURUSD, +0.45%) strengthened as it rose by 0.5% against the U.S. dollar, trading at $1.1061.

CPI Data and Expectations

Both headline and core CPI demonstrated a decline of 0.2% in June, which was lower than economists' expectations of 0.3%. This decrease marked the smallest monthly reading since August 2021. On a 12-month basis, core CPI, which excludes volatile food and energy prices, rose by 4.8%, falling short of the expected 5%.

Traders' Views and Anticipated Rate Hikes

According to CME's FedWatch tool, traders currently view another Federal Reserve rate hike in July as almost certain, with odds just below 90% as of Wednesday morning. However, the likelihood of a second rate hike later this year has diminished.

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