The U.S Stock Market Rises As Inflation Data And Corporate Earnings Loom

U.S. stocks are making gains on Tuesday as investors anticipate the release of the June inflation report and the start of the second-quarter corporate earnings season later this week.

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Here's a summary of the stock market's performance:

• The S&P 500 rose by 0.2% or 11 points to reach 4,420.
• The Dow Jones Industrial Average gained 0.3% or 121 points, reaching 34,066.
• The Nasdaq Composite increased by 0.2% or 32 points, standing at 13,718.
• On Monday, the Dow Jones Industrial Average rose by 0.62% or 210 points to 33,944, the S&P 500 increased by 0.24% or 11 points to 4,410, and the Nasdaq Composite gained 0.18% or 25 points to 13,685.

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The S&P 500 index broke a three-day losing streak on Monday as benchmark bond yields retreated from recent highs. Yields continued to ease on Tuesday, contributing to the stable performance of equity index futures in early trading.

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Regarding Tuesday's market activity, it can be characterized as a positive breather, at least for the time being.

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"Markets started the week in a holding pattern, but a rates rally in the U.S emerged as the main theme on Monday that sent the 10-year Treasury yield back beneath 4% again," noted Henry Allen, strategist at Deutsche Bank.

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Allen added, "The decline in yields followed some dovish tones in usually second-tier U.S. data [softer household inflation expectations and lower used car prices], which comes ahead of tomorrow's all-important U.S. CPI print."

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The June consumer price index report is expected to show a decrease in annual headline inflation to 3.1% from the multi-decade peak of 9.1% recorded a year earlier. However, core inflation, which excludes volatile items like energy and food prices, is expected to remain higher at 5%.

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The June inflation data is significant as it is the last major economic indicator before the Federal Reserve's upcoming interest rate meeting. The Federal Open Market Committee (FOMC) is scheduled to convene on July 25 and 26.

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According to the Trade Algo, there is a more than 92% probability of a 25 basis point increase in the federal funds rate at the upcoming meeting.

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However, some analysts suggest that there is potential for a positive surprise for equity investors. If the inflation figure comes in weaker than forecasted, signaling a move toward the Fed's target, it could lead to a brief market rally and a shift in the consensus from expecting two rate hikes this year to just one.

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In addition to the inflation report, the focus will soon shift to the second-quarter corporate earnings season. Major banks like JPMorgan Chase & Co., Wells Fargo & Co., and Citigroup Inc. are set to announce their results on Friday. Analysts will closely monitor these earnings reports, particularly in light of previous challenges faced by the banking sector.

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