Wall Street Closes Lower Ahead of Key Inflation Data

US stocks closed marginally lower on Monday, ahead of key inflation data to be released on Tuesday. Keep reading to find out more about this and other news. 

US Markets Eye Inflation Data

On Monday, Wall Street's main indices inched lower, as investors eyed Tuesday’s crucial inflation data and its potential impact on interest rates. 

The S&P 500, Nasdaq and Dow Jones edged down by 0.25%, 0.30% and 0.45% respectively.

Following a disappointing job report earlier this month, which signalled weakness in the labour market and prompted President Trump to fire the head of the Bureau of Labor Statistics (BLS), expectations that the Federal Reserve will cut rates at its next meeting have risen sharply. 

According to CME’s FedWatch tool, markets are pricing in an 84% chance that the Fed will cut rates by 25 basis points at its September meeting. 

A lower inflation reading on Tuesday would support the case for lowering rates. However, annual inflation is expected to have risen more quickly in July than the previous month, in a sign that tariffs may be filtering through to consumers. 

The Consumer Price Index (CPI) is forecast to have risen 2.8% on an annual basis in July, up from 2.7% in June.  

Meanwhile, core CPI – which strips out volatile food and energy prices and is viewed as a measure of underlying inflation – is expected to have risen 3.0% in the 12 months leading to July, up from 2.9% in June.

US and China Trade Truce Extension

Elsewhere on Monday, President Trump signed an executive order extending a trade truce between Washington and Beijing, which had been due to expire.

Under the agreement, higher tariffs will remain suspended for a further 90 days as the world’s two largest economies continue talks on trade. However, the US will maintain tariffs on Chinese imports at 30% whilst China will hold a 10% levy on US imports. 

Earlier on Monday, it was reported that chip makers Nvidia and AMD had agreed to pay the US government 15% of revenue generated from chips sold in China, in exchange for export licenses to the key market. 

Previously, Washington had used export controls to restrict sales of powerful chips used in artificial intelligence (AI) to China on national security grounds.

In April, Trump banned sales of Nvidia’s H20 chip and AMD’s MI308 chip to China. However, last month, these bans were lifted, with China having also eased export restrictions on rare earths. 

Lithium Stocks Surge

News that Chinese battery giant Contemporary Amperex Technology (CATL) had halted production at a major lithium mine in China sent lithium stocks soaring on Monday, amidst speculation that Beijing may be moving to curb overproduction. 

CATL said that it was seeking to renew its license for the Jianxiawo mine, which accounts for 6% of global output. Its previous permit for the mine expired on 9 August.  

Hong Kong listed Tianqi Lithium and Ganfeng Lithium closed Monday 18% and 21% higher respectively, with Australia’s Liontown Resources also jumping 18%. However, all three gave up some of these gains on Tuesday morning. 

In the US, Albemarle was the day’s second best performer on the S&P 500, rising 7% and Chile’s Sociedad Quimica y Minera posted a gain of almost 9%. 

After racing to record highs in 2022, lithium prices have slumped more than 80% as the market faces oversupply and weaker than expected demand for electric vehicles. 

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