REFILE-LIVE MARKETS-US stocks rally, but struggle to hold the high ground

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U.S. STOCKS RALLY, BUT STRUGGLE TO HOLD THE HIGH GROUND

Wall Street's main indexes are higher early on Tuesday after data showed inflation rose broadly in line with expectations in July, putting the Federal Reserve on track to lower interest rates next month.

Indeed, interest rate probabilities are pricing in a total of 57 basis points of cuts through year-end.

With this, the S&P 500 index .SPX and Nasdaq Composite .IXIC are now both on track to post fresh record closing highs. However, both have been tentative so far this morning. The SPX, which is now around 6,402, is above its 6,389.77 record close, but has been struggling to overwhelm the 6,400 area.

All S&P 500 sectors are now green with Energy .SPNY, up around 1.5%, posting the biggest gain. Real Estate .SPLRCR, off just 0.2% is the weakest group.

Under the surface, the DJ Transportation Average .DJT is an outperformer. Big Banks .SPXBK and Regional Banks .KRX are also posting strong gains.

Gold Stocks .HUI are lower.

Regarding the CPI data, Carl Weinberg, chief economist at High Frequency Economics said, "Core goods prices are rising steadily. But we see no signal in these July data that tariffs have pushed up the CPI."

Weinberg adds, "Let’s call the CPI report for July STEADY — not nearly soft enough to discourage the Fed from cutting rates in September but also not nearly scary enough to encourage any talk about rate hikes. This outcome should not be terrifying for financial markets. Tariffs thus far have not led to any scary price increases."

As for a coming Fed cut in September, Weinberg's view is at odds with market pricing - "There is nothing here to prompt the Fed to contemplate adjusting rates either way. CPI increases are above target, but are steady near term and slowing in the medium term. We believe the FOMC will say this report gives it space to maintain current monetary policy settings while waiting for the evidence on tariffs and price trends to unfold."

Here is a snapshot of where markets stood just shortly before 10:00 a.m. EDT:

(Terence Gabriel)

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EARLIER ON LIVE MARKETS:

U.S. STOCK FUTURES RALLY AFTER ROUGHLY IN-LINE CPI DATA CLICK HERE

RUSSIAN GAS TAPS TO EUROPE UNLIKELY TO FLOW ANYTIME SOON CLICK HERE

THE FED: IT'S COMPLICATED! CLICK HERE

TARIFF U-TURN STEADIES GOLD, UBS KEEPS $3,500 VIEW CLICK HERE

STOXX NUDGES UP, BUT STUCK IN RANGE CLICK HERE

BEFORE THE BELL: EUROPEAN FUTURES EDGE UP CLICK HERE

TRUCE EXTENDED, ECONOMIC DATA NEXT CLICK HERE