Both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) reversed an afternoon drop to finish Wednesday’s trading session in positive territory.
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Investors received a positive surprise after June’s Producer Price Index (PPI) was flat month-over-month. That figure was below the consensus estimate for a 0.2% increase and down from 0.3% MoM growth in May. June’s PPI rose by 2.3% year-over-year, below the estimate for 2.5% and down from 2.6% in May. PPI measures the average selling price producers receive for their goods and services.
With PPI under control, the odds of a 25-bps rate cut at the September Federal Open Market Committee meeting are now at 56.2% compared to 54.5% yesterday and 65.8% a week ago. The odds of a rate cut this month are at a modest 2.6%.
The market plummeted after reports circulated that President Trump would likely fire Fed Chair Jerome Powell after holding a discussion and informal poll with House Republicans. However, Trump quickly quelled those rumors.
“I don’t rule out anything. But I think it’s highly unlikely,” said Trump at the White House. “Unless he has to leave for fraud, I mean, it’s possible there’s fraud involved with the $2.5, $2.7 billion renovation.” Trump also denied that he had already written a letter to fire Powell.
“Nobody is fooled by this pretext to fire Chair Powell,” said Senator Elizabeth Warren about the possibility of Trump firing Powell because of the Fed’s costly headquarters renovation. “And markets will tank if he does.”
On the trade front, Trump is preparing to send tariff letters to over 150 countries. These countries do not play a significant role in U.S. trade, with many declining to engage in trade discussions. “The big one really is going to be on the 150 countries that we’re really not negotiating with, and they’re smaller — we don’t do much business with,” said Trump. He added that the U.S. would likely sign a trade deal with India soon, while Japan’s 25% tariff would probably stay in place.
The S&P 500 (SPX) closed higher by 0.32% while the Nasdaq 100 (NDX) gained 0.10%.
