Morning Bid: Stay of execution?

Inflation concerns threatened to overshadow the stock market's performance, buoyed by strong AI-infused second-quarter earnings. However, two inflation data releases provided reassurance, leading to a decrease in Treasury yields. The Federal Reserve's chance of raising interest rates in September fell to one-in-three, down from a coin toss previously.

Despite high oil and energy costs, the average 30-year fixed mortgage rate remained elevated at 6.7%. Iran's control over the Hormuz Strait and sporadic attacks in the Gulf and Red Sea continued to impact crude prices, with Brent crude nearing $90 per barrel and U.S. retail gas prices still above $4 per gallon. The Federal Reserve now faces the PCE price measure, which has consistently been above its 2% target for several years.

Despite hopes that tariff-related goods price rises would subside, other factors such as rising corporate leverage, product tightness in the tech sector, and the Fed's credibility in getting inflation back on track are fueling debate among Fed officials. The situation was further complicated by President Trump's demand for Fed Governor Lisa Cook to clear her name over mortgage fraud allegations, potentially threatening the Fed's independence.

Meanwhile, stocks rallied on Wall Street and in Europe, driven by strong AI-related companies and an unexpectedly robust British GDP reading for June.