Markets Eye September Fed Rate Cut as Inflation Continues to Cool

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Markets Eye September Fed Rate Cut as Inflation Continues to Cool

The and rose on Tuesday as investors analyzed new and considered what it might mean for monetary policy. The was, however, down as much as 318 points before a slight recovery left the index trading 180 points down from its daily high at the time of writing.

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Source: TradingView

Softer US Inflation Keeps Equities on the Front Foot

in the US dropped to 2.3% in April 2025, the lowest level since February 2021, down from 2.4% in March and below predictions of 2.4%. Energy prices fell by 3.7%, a ******* drop than the 3.3% decline in March.

The CPI (MoM) went up by 0.2% in April, bouncing back from a 0.1% drop in March but below the expected 0.3% increase. Housing costs rose 0.3% and made up more than half of the total monthly rise.

Markets will be breathing a sigh of relief as price hike threats appear to be receding, thanks in part to recent trade agreements. There is optimism that more trade agreements are on the way, but for now, we will have to wait and see.

The question on everyone’s lips is what this means for the and US monetary policy moving forward?

CPI Implications for the Federal Reserve

Prior to yesterday’s CPI release, markets had already adjusted their

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following the latest meeting. Markets had begun pricing in only two Fed rate cuts this year, with yesterday’s data likely to reinforce this stance.

Taking a deeper look into the inflation data and there are some interesting takeaways. Firstly, services make up most of the US inflation basket. Goods, excluding food and energy, which are most affected by tariffs, account for only 19.4% of the items used to measure inflation. This means housing and services can help offset any inflation caused by tariffs, which is less worrying now due to the recent easing of tensions with China.

With that in mind, market participants pricing in a first rate cut in September is beginning to look increasingly likely. Inflation should be less of an issue for the Fed moving forward if the current status quo remains as is.

Individual Stocks – Biggest Movers for the Day

Most large-cap and growth stocks rose, with Nvidia (NASDAQ:) up 5.5%, Meta (NASDAQ:) up 2.5%, and

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(NASDAQ:) 2.4% respectively. Coinbase Global (NASDAQ:), set to join the S&P 500 on May 19, was a standout performer, surging 15%.

With over 90% of S&P 500 companies having reported earnings, investors now await Walmart’s (NYSE:) results, expected later this week.

Looking at the Dow Jones and its struggles yesterday, the finger may in part be pointed toward UnitedHealth (NYSE:) which dropped around 12%. This came about after the insurer paused its yearly forecast and its CEO resigned.

Technical Analysis – S&P 500

From a technical standpoint, the S&P 500 has gained significant ground over the past two weeks as trade fears subside.

The index now trades above both the 100 and 200-MAs for the first time since February 27, 2025 in what could be seen as an ominous sign.

The only thing that bears could keep an eye on is the RSI ******* 14, which is approaching oversold territory and a host of key levels resting above the current price.

There is also the price gap from the weekend, which may need to be filled, however, price gaps may be filled at any time, and there is no guarantee that this will take place anytime soon.

Immediate resistance rests at 5910 before the 6025 handle comes into focus.

If a move to the downside materializes, immediate support rests at 5828 and 5770, respectively.

S&P 500 Daily Chart, May 13, 2025

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Source: TradingView

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