The S&P 500 ended higher on Tuesday after a softer-than-expected inflation report boosted hopes that the Federal Reserve may not need to tighten monetary policy as aggressively this year. Polymarket traders now expect the benchmark index to extend those gains at Wednesday’s open.
The S&P 500 rose 0.38% to close at 7,543.59. The July 15 Polymarket contract implied a 73% probability that the index will open higher on Wednesday.
Why That Number Matters
June’s consumer price index fell 0.4% from the previous month, while annual inflation slowed to 3.5%, below economists’ expectations of 3.8%.
The softer inflation reading prompted traders to sharply reduce expectations for an immediate Federal Reserve rate hike. According to CME FedWatch, the probability of a July hike fell to 17% from 42% a day earlier, although markets still see a meaningful chance of higher rates later this year.
Attention now turns to another busy day of earnings, with United Airlines (NYSE:UAL), Morgan Stanley (NYSE:MS), Johnson & Johnson (NYSE:JNJ) and BlackRock (NYSE:BLK) scheduled to report after major U.S. banks broadly exceeded expectations to kick off earnings season.
The Bull Case
Cooling inflation reinforced hopes that the Fed can remain on hold in the near term, supporting risk appetite across equities.
Semiconductor stocks rebounded after Monday’s selloff, with the VanEck Semiconductor ETF rising 2.5% (NASDAQ:SMH), while Micron Technology (NASDAQ:MU) and Lam Research (NASDAQ:LAM) gained around 5%. Strong results from major U.S. banks also added to optimism that corporate earnings remain resilient despite macroeconomic uncertainty.
However, investors are not out of the woods yet.
Although inflation cooled in June, oil prices remained elevated as renewed U.S. strikes on Iran continued to fuel geopolitical uncertainty. Brent crude remained above $84 per barrel even after retreating from session highs. Markets also continue to price in a high probability of a Federal Reserve rate hike by September.
S&P 500 futures climbed 0.11% early Wednesday.
How The Previous Bet Played Out: The S&P 500 opened Tuesday at 7,536.70, above Monday’s close of 7,515.34, meaning the July 14 Polymarket contract resolved “Up.” The previous day’s July 14 contract attracted approximately $133,818 in traded volume, marking one of the stronger betting sessions this month and a notable pickup from the relatively thin activity seen through much of the second week of July.
Image via Shutterstock
Recent Comments