Waller, Iran Strikes Push July Rate-Hike Odds to 43%
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- June CPI was expected to show inflation eased to 3.5%, though Swissquote's Ipek Ozkardeskaya warned gasoline prices already above June levels could reheat the next report amid Middle East tensions
- JPMorgan, Goldman Sachs, Wells Fargo, and Citigroup launched Q2 earnings season on Tuesday, with the S&P 500 sitting roughly 10% higher year-to-date heading into results
- Fed Governor Christopher Waller said Monday that the central bank may need to raise rates 'in the near term' if inflation stays well above its 2% target
- Traders priced a 43% chance of a quarter-point Fed rate hike at the July 29 meeting, up from 34% a day earlier per CME's FedWatch tool
- U.S. forces conducted a third consecutive night of strikes against Iran, with reports of a possible 20% fee on cargo ships transiting the Strait of Hormuz
- Oil futures climbed to their highest level in four weeks, with analysts noting the Iran conflict threatens to reignite price pressures just as disinflation takes hold
- Chip stocks steadied in premarket trading after Monday's selloff, with the iShares Semiconductor ETF (SOXX) rising 2.4% as Nasdaq 100 E-minis gained 0.48%
Why it matters: The market's fragile calm cracked in a single session: Waller's hawkishness lifted July 29 rate-hike odds by 9 percentage points to 43%, while a third straight night of Iran strikes pushed oil to a four-week high and introduced a possible 20% Strait of Hormuz transit fee — meaning the Fed's July decision is now shaped as much by geopolitics as by the 3.5% CPI print investors expected at 8:30 a.m.
