In-Line CPI Offers Relief for Stock Market, Strait of Hormuz Remains Wild Card

• July CPI (headline and core) met analyst estimates, with month-over-month headline CPI at 0.1% and core CPI at 0.2%.
• Year-over-year headline CPI was 3.4% (down from 3.5% prior) and core CPI was 2.5% (down from 2.6% prior).
• Energy components like gasoline (-2.9% M/M) and fuel oil (-1.7% M/M) saw declines, while food at home also decreased by 0.1% M/M.
• Stock futures (S&P 500, NASDAQ-100, Dow Jones, Russell 2000) rallied post-report, while the 10-year Treasury yield remained relatively flat.
• CME Fed Watch probabilities for rate hikes, particularly for September and October, are still notable but the speaker suggests cooling core inflation could lead to a reassessment by the Fed.
• Crude oil futures, despite the CPI report, are up over 8% this week due to Middle East headlines, posing a potential inflationary risk for future reports.

The July CPI report came in line with Wall Street estimates, offering a sense of relief to the stock market, with equity futures trading higher. Core inflation showed signs of cooling, which could influence the Federal Reserve's future rate hike decisions. However, rising crude oil prices due to ongoing Middle East tensions remain a potential concern for upcoming inflation reports.