Tariffs, Inflation, and the Market’s New Balancing Act
The US stock market spent Wednesday oscillating between modest gains and mild losses, as investors parsed a confluence of factors: surprisingly tame wholesale inflation data, a relentless drumbeat of tariff news from the White House, and a flurry of bank earnings results that both soothed and complicated the picture. The S&P 500 and Nasdaq hovered near the flatline, while the Dow managed a minor lift—though far less than would justify champagne.
A flat read on the Producer Price Index for June offered tentative relief for those worried about inflation, with annual price increases running slower than projections. Yet, this eased only part of the market’s anxiety: hotter June consumer inflation and another round of Trump-driven tariff announcements kept investors on their toes. New 30% duties are set to hit imports from Mexico and the EU starting August 1, even as negotiations with Indonesia produced a separate 19% tariff deal.
Corporate America Rises and Sputters Amid Trade Chaos
Against this volatile policy backdrop, major banks and pharmaceutical giants took turns reassuring Wall Street. Johnson & Johnson delivered a robust earnings beat, sending its shares to their best day in over a year and raising full-year guidance in the process. Meanwhile, Goldman Sachs, Bank of America, and Morgan Stanley all reported profits above expectations, benefiting from the uptick in trading volatility and dealmaking—side effects of trade uncertainty.
Not all was rosy: ASML, a critical supplier to the world’s chipmakers, saw shares drop on weak guidance and flagged that trade headwinds could stall growth into 2026. On the continent, European stocks opened lower, with sector-specific stumbles and a hot UK inflation print compounding the regional malaise.
Fed Patience Tested as Rate Cut Bets Wane
Markets are also recalibrating expectations for Federal Reserve rate cuts. After June’s inflation readings, traders have begun paring bets on a near-term policy pivot, anticipating that rate cuts will remain on pause even as presidential pressure to lower borrowing costs mounts. According to the CME Group, the probability of a Fed move in September slipped from 66% last week to near-coin-toss levels now, reflecting a market in wait-and-see mode as the labor market holds steady and inflation simmers above targets (full details).
Policy Shifts: From Crypto to 401(k)s
Beyond the immediate skirmishes over inflation and tariffs, a series of policy moves are quietly reshaping the investment landscape. In a late Tuesday reversal, President Trump signaled that previously stalled crypto regulation bills now have the congressional votes to advance, removing a key hurdle for an industry in legislative limbo. Meanwhile, the administration’s imminent executive order would open the door for private assets in 401(k) plans, potentially giving asset managers new avenues—and investors new risks—in retirement planning.
For now, markets remain sensitive to every rail of data and every tweet about trade, with volatility lurking just below the surface—as analysts warn that prolonged uncertainty could test the recent streak of record highs. Gold, perhaps not coincidentally, has surged over 25% this year as nervous capital searches for safe harbor (more here).
