Stock prices did not rise sharply after inflation fell below 3% for the first time in three years. Was inflation already priced in and had traders hoped for an even lower reading?

• The Nasdaq Composite IXIC Inflation barely moved on Wednesday, rising 5 points after the US CPI report showed further moderation in inflation. It was 2.9% in July, falling below 3% for the first time since 2021. However, markets did not react with their usual “buy everything, invest now, investigate later” response. Instead, they were mild and expressed cautious optimism. The S&P 500 gained 0.4% and the Dow Jones rose 0.6%. Why this muted reaction?
• In addition to the good data With rates already behind and already priced in, traders are looking ahead to the Fed’s policy meeting scheduled for mid-September. Fed officials have said they will most likely cut the benchmark interest rate from its 23-year high of 5.50%. The question currently on the markets’ minds is not if, but by how much – will it be a 25 basis point cut or a more substantial 50 basis point cut?
• One thing that might What concerns investors is the inflation data, which is in line with consensus. The Consumer Price Index (CPI) reached analysts’ expectations of 2.9%, but this did not trigger any buying momentum as it unsurprisingly beat estimates. Perhaps the markets were even expecting an even lower reading, which would surely prompt the Fed to ease up and cut borrowing costs by 50 basis points.
• Investors like Exceeding expectations for the Fed and the economy, they may already be factoring in a massive 50 basis point cut in interest rates. A lot of data will be released between now and the Fed meeting. The flood of reports will pave the way for the US central bank to either confirm these expectations or dash hopes for a quick and significant easing of monetary policy. Futures contracts tied to the major stock indices flashed green on Thursday morning.