U.S. stock markets surged on Tuesday, August 12, 2025, with the S&P 500, Dow Jones Industrial Average, and Nasdaq all recording gains. The positive market sentiment was primarily driven by the release of July's inflation data, which showed a 2.7% annual increase, matching June's figure and slightly below the anticipated 2.8%. These cooling inflation numbers have boosted investor confidence in the Federal Reserve's potential to lower interest rates, with market expectations for a September rate cut rising to 94% from 86% the previous day. The Federal Reserve has maintained its federal funds rate in the 4.25%-4.50% range since December 2024, and the market is now anticipating a shift in monetary policy.
The positive global market reaction was also influenced by the U.S. decision to postpone tariffs on China, leading to a 2.1% rise in Japan's Nikkei 225 and a 0.5% increase in South Korea's Kospi. In corporate news, Intel's stock saw a 1.5% rise following positive commentary from President Trump. The July inflation report indicated that while overall inflation remained at 2.7%, core inflation, excluding food and energy, increased to 3.1% year-over-year, partly attributed to tariffs impacting consumer goods. However, falling energy prices, with gasoline down 2.2%, provided some relief. The Federal Reserve's decision to hold interest rates steady since December 2024 has been influenced by concerns that tariffs could exacerbate inflation. Nevertheless, the current inflation data, combined with a slowing job market, is increasing the likelihood of a rate cut, with analysts suggesting the Fed may prioritize employment. The next Federal Reserve interest rate decision is scheduled for September 17, 2025. Intel's stock performance was bolstered by news of CEO Lip-Bu Tan's meeting with President Trump, which appeared to foster optimism despite previous calls for Tan's resignation. Intel's significant federal funding, including nearly $8 billion from the CHIPS and Science Act, highlights its strategic importance.