By STAN CHOE, Associated Press Business Writer

NEW YORK (AP) — The U.S. stock market is climbing toward records on Tuesday after data suggested inflation across the country was a touch better last month than economists expected.

The S&P 500 rose 0.6% and was on track to top its all-time high set two weeks ago. The Dow Jones Industrial Average was up 251 points, or 0.6%, as of 9:35 a.m. Eastern time, while the Nasdaq composite was 0.7% higher and also heading toward a record.

Stocks got a lift from hopes that the better-than-expected inflation report will give the Federal Reserve more leeway to cut interest rates at its next meeting in September.

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Lower rates would give a boost to investment prices and to the economy by making it cheaper for U.S. households and businesses to borrow to buy houses, cars or equipment. President Donald Trump has angrily been calling for cuts to help the economy, often insulting the Fed’s chair personally while doing so.

But the Fed has been hesitant because of the possibility that Trump’s tariffs could make inflation much worse. Lowering rates would give inflation more fuel, potentially adding oxygen to a growing fire. That’s why Fed officials have said they wanted to see more data come in about inflation before moving.

Tuesday’s report showed U.S. consumers paid prices for groceries, gasoline and other costs of living that were 2.7% higher in July than a year earlier. That’s the same inflation rate as June’s, but it was below the 2.8% that economists expected.

The report pushed traders on Wall Street to bet on a 94% chance that the Fed will cut interest rates for the first time this year in September. That’s up from nearly 86% a day earlier, according to data from CME Group.

The Fed will receive one more report on inflation, as well as one more on the U.S. job market, before its next meeting, which ends Sept. 17. The most recent jobs report was a stunner, coming in much weaker than economists expected.

Some economists warn that more twists and turns in upcoming data could make the Fed’s upcoming decisions not so easy.

Even Tuesday’s better-than-expected inflation report had some discouraging undertones. An underlying measure of inflation, which economists say does a better job of predicting where inflation may be heading, hit its highest point since early this year, noted Gary Schlossberg, market strategist at Wells Fargo Investment Institute.

“Eventually, tariffs can show up in varying degrees in consumer prices, but these one-off price increases don’t happen all at once,” said Brian Jacobsen, chief economist at Annex Wealth Management. “That will confound the Fed and economic commentators for months to come.”

Other central banks around the world have been lowering interest rates, and Australia’s on Tuesday cut for the third time this year.

On Wall Street, Intel’s stock rose 1.5% after Trump said its CEO has an “amazing story,” less than a week after he had demanded Lip-Bu Tan’s resignation.

Cardinal Health dropped 12.4% even though the company reported a stronger profit for the latest quarter than analysts expected. Its revenue fell short of forecasts. Analysts said the market’s expectations were particularly high for the company after its stock had already soared 33.3% for the year coming into the day.

Critics say the broad U.S. stock market is looking expensive after its surge from a bottom in April. That’s putting pressure on companies to deliver continued growth in profit.

In stock markets abroad, indexes edged up in China after Trump signed an executive order late Monday that delayed hefty tariffs on the world’s second-largest economy by 90 days. The move was widely expected, and the hope is that it will clear the way for a possible deal to avert a dangerous trade war between the United States and China.

Japan’s Nikkei 225 jumped 2.1%, and South Korea’s Kospi fell 0.5% for two of the world’s bigger moves.

In the bond market, the yield on the 10-year Treasury rose to 4.29% from 4.27% late Monday.

The yield on the two-year Treasury, which more closely tracks expectations for the Fed, edged down to to 3.75% from 3.76%.

AP Business Writers Yuri Kageyama and Matt Ott contributed.

By CHRISTOPHER RUGABER, Associated Press Economics Writer

WASHINGTON (AP) — U.S. inflation was unchanged in July while a measure of underlying inflation rose to its highest level in five months as tariffs push the price of imported goods higher while gas and grocery prices cooled.

Consumer prices rose 2.7% in July from a year earlier, the Labor Department said Tuesday, the same as the previous month and up from a post-pandemic low of 2.3% in April. Excluding the volatile food and energy categories, core prices rose 3.1%, up from 2.9% in June. Both figures are above the Federal Reserve’s 2% target.

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The figures suggest that slowing rent increases and cheaper gas are offsetting some impacts of President Donald Trump’s sweeping tariffs. Many businesses are also absorbing some of the cost of the duties. Tuesday’s figures likely include some impact from the 10% universal tariff Trump imposed in April, as well as higher duties on countries such as China and Canada.

Still, stubbornly high inflation puts the Federal Reserve in a difficult spot: Hiring slowed sharply in the spring, after Trump announced tariffs in April. The stalling out of job gains has boosted financial market expectations for an interest rate cut by the central bank.

Chair Jerome Powell has warned that worsening inflation could keep the Fed on the sidelines — a stance that has enraged Trump, who has defied traditional norms of central bank independence and demanded lower borrowing costs.

Gas prices fell 2.2% from June to July and have plunged 9.5% from a year earlier, the government’s report said. Grocery prices slipped 0.1% last month, though they are still 2.2% higher than a year ago. Restaurant meals continued to get more expensive, however, rising 0.3% in July and 3.9% from a year earlier.

Tariffs appeared to raise the cost of some imported items: Shoe prices jumped 1.4% from June to July, though they are still just 0.9% more expensive than a year ago. The cost of furniture leapt 0.9% in July and is 3.2% higher than a year earlier. Clothing prices ticked up 0.1% in July, after a larger rise in June, though they are still slightly cheaper than a year ago.

Tuesday’s data arrives at a highly-charged moment for the Labor Department’s Bureau of Labor Statistics, which collects and publishes the inflation data. Trump fired Erika McEntarfer, then the head of BLS, after the Aug. 1 jobs report also showed sharply lower hiring for May and June than had previously been reported.

The president posted on social media Monday that he has picked E.J. Antoni, an economist at the conservative Heritage Foundation and a frequent critic of the jobs report, to replace McEntarfer.

“E.J. will ensure that the Numbers released are HONEST and ACCURATE,” Trump said on Truth Social.

Adding to the BLS’s turmoil is a government-wide hiring freeze that has forced it to cut back on the amount of data it collects for each inflation report, the agency has said. UBS economist Alan Detmeister estimates that BLS is now collecting about 18% fewer price quotes for the inflation report than it did a few months ago. He thinks the report will produce more volatile results, though averaged out over time, still reliable.

Americans are likely to absorb more trade-war costs in the coming months as Trump begins to finalize tariffs. Once businesses know what they will be paying, they are more likely to pass those costs to customers, economists say.

Trump has insisted that overseas manufacturers will pay the tariffs by reducing their prices to offset the duties. Yet the pre-tariff prices of imports haven’t fallen much since the levies were put in place.

Economists at Goldman Sachs estimate that foreign manufacturers have absorbed just 14% of the duties through June, while 22% has been paid by consumers and 64% by U.S. companies. Based on previous patterns, however — such as Trump’s 2018 duties on washing machines — the economists expect that by this fall consumers will bear 67% of the burden, while foreign exporters pay 25% and U.S. companies handle just 8%.

Many large U.S. companies are raising prices in response to the tariffs, including apparel makers Ralph Lauren and Under Armour, and eyewear company Warby Parker.

Consumer products giant Procter & Gamble, maker of Crest toothpaste, Tide detergent and Charmin toilet paper, said late last month that it would lift prices on about a quarter of its products by mid-single-digit percentages.

And cosmetics maker e.l.f. Beauty, which makes a majority of its products in China, said on Wednesday that it had raised prices by a dollar on its entire product assortment as of Aug. 1 because of tariff costs, the third price hike in its 21-year history.

“We tend to lead and then we will see how many more kind of follow us,” CEO Tarang Amin said on an earnings call Wednesday.

Matt Pavich, senior director of strategy and innovation at Revionics, a company that provides AI tools to large retailers to help them evaluate pricing decisions, says many companies are raising prices selectively to offset tariffs, rather than across the board.

“Up until now we haven’t seen a massive hit to consumers in retail prices,” Pavich said. “Now, they are going up, we’ve seen that.”

Associated Press Retail Writer Anne D’Innocenzio in New York contributed to this report.

By ASHRAF KHALIL, Associated Press

WASHINGTON (AP) — The questions came fast to the mayor of the nation’s capital, many of them designed to get her to say something harsh about Donald Trump — in particular, the president’s freshly announced plan to take over the Metropolitan Police Department and call in the National Guard.

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But, for the most part, third-term Washington, D.C., Mayor Muriel Bowser didn’t take the bait. She calmly laid out the city’s case that crime has been dropping steadily and said Trump’s perceived state of emergency simply doesn’t match the numbers.

She also flatly stated that the capital city’s hands are tied and that her administration has little choice but to comply. “We could contest that,” she said of Trump’s definition of a crime emergency, “but his authority is pretty broad.”

Her comments came Monday hours after Trump, flanked by the people who oversee the military and the Justice Department, said that in the hopes of reducing crime he would be taking over Washington’s police department and activating 800 members of the National Guard, some of whom arrived early Tuesday. The crime Trump talked about is the same crime that city officials stress is already falling noticeably.

Toward the end, the mayoral composure slipped a bit when Bowser made a reference to Trump’s “so-called emergency” and concluded, “I’m going to work every day to make sure it’s not a complete disaster.”

The city and Trump have had a bumpy relationship

While Trump invokes his plan by saying that “we’re going to take our capital back,” Bowser and the MPD maintain that violent crime overall in Washington has decreased to a 30-year low after a sharp rise in 2023. Carjackings, for example, dropped about 50% in 2024, and are down again this year. More than half of those arrested, however, are juveniles, and the extent of those punishments is a point of contention for the Trump administration.

Bowser, a Democrat, spent much of Trump’s first term in office openly sparring with the Republican president. She fended off his initial plans for a military parade through the streets and stood in public opposition when he called in a multi-agency flood of federal law enforcement to confront anti-police brutality protesters in summer 2020. She later had the words “Black Lives Matter” painted in giant yellow letters on the street about a block from the White House.

Washington Mayor Muriel Bowser speaks during a news conference on President Donald Trump’s plan to place Washington police under federal control and deploy National guard troops to Washington, Monday, Aug. 11, 2025, in Washington. (AP Photo/Julia Demaree Nikhinson)

In Trump’s second term, backed by Republican control of both houses of Congress, Bowser has walked a public tightrope for months, emphasizing common ground with the Trump administration on issues such as the successful effort to bring the NFL’s Washington Commanders back to the District of Columbia.

She watched with open concern for the city streets as Trump finally got his military parade this summer. Her decision to dismantle Black Lives Matter Plaza earlier this year served as a neat metaphor for just how much the power dynamics between the two executives had evolved.

Now that fraught relationship enters uncharted territory as Trump has followed through on months of what many D.C. officials had quietly hoped were empty threats. The new standoff has cast Bowser in a sympathetic light, even among her longtime critics.

“It’s a power play and we’re an easy target,” said Clinique Chapman, CEO of the D.C. Justice Lab. A frequent critic of Bowser, whom she accuses of “over policing our youth” with the recent expansions of Washington’s youth curfew, Chapman said Trump’s latest move “is not about creating a safer D.C. It’s just about power.”

Where the power actually lies

Bowser contends that all of the power resides with Trump, and her administration can do little other than comply and make the best of it. The native Washingtonian spent much of Monday’s press conference tying Trump’s takeover to the larger issue of statehood for the District of Columbia. As long as Washington, D.C., remains a federal enclave with limited autonomy under the 1973 Home Rule Act, she said it will remain vulnerable to such takeovers.

“We know that access to our democracy is tenuous,” Bowser said. “That is why you have heard me, and many many Washingtonians before me, advocate for full statehood for the District of Columbia.”

Section 740 of the Home Rule Act allows the president to take over Washington’s police for 48 hours, with possible extensions to 30 days, during times of emergencies. No president has done so before, said Monica Hopkins, executive director of the American Civil Liberties Union’s D.C. chapter.

Federal law enforcement officers patrol The Wharf, Monday, Aug. 11, 2025, in Washington. (AP Photo/Julia Demaree Nikhinson)

“That should alarm everyone,” she said, “not just in Washington.”

For Trump, the effort to take over public safety in Washington reflects an escalation of his aggressive approach to law enforcement. The District of Columbia’s status as a congressionally established federal district gives him a unique opportunity to push his tough-on-crime agenda, though he has not proposed solutions to the root causes of homelessness or crime.

“Let me be crystal clear,” Attorney General Pam Bondi said during Trump’s announcement news conference. “Crime in D.C. is ending and ending today.”

The action fits a presidential pattern

Trump’s declaration of a state of emergency fits the general pattern of his second term in office: He has declared states of emergency on issues ranging from border protection to economic tariffs, enabling him to essentially rule via executive order. In many cases, he has moved forward while the courts sorted them out.

Bowser’s claims about successfully driving down violent crime rates received backing earlier this year from an unlikely source. Ed Martin, Trump’s original choice for U.S. attorney for the District of Columbia, issued a press release in April hailing a 25% drop in violent crime rates from the previous year.

“Thanks to the leadership of President Trump and the efforts of our ‘Make D.C. Safe Again’ initiative, the District has seen a significant decline in violent crime,” Martin said. “We are proving that strong enforcement, and smart policies can make our communities safer.”

In May, Trump abandoned his efforts to get Martin confirmed for the post in the face of opposition in Congress. His replacement candidate, former judge and former Fox News host Jeanine Pirro, was recently confirmed. On Monday, Pirro — standing next to Trump — called his takeover “the step that we need right now to make criminals understand that they are not going to get away with it anymore.”

Associated Press writer Lindsay Whitehurst contributed to this report.

By MICHELLE CHAPMAN, Associated Press Business Writer

Less than a week after demanding his resignation, President Donald Trump is now calling the career of Intel’s CEO an “amazing story.”

Shares of Intel, which slid last week after CEO Lip-Bu Tan came under fire from the U.S. president, bounced higher before the opening bell Tuesday.

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The attack from Trump came after Sen. Tom Cotton sent a letter to Intel Chairman Frank Yeary expressing concern over Tan’s investments and ties to semiconductor firms that are reportedly linked to the Chinese Communist Party and the People’s Liberation Army. Cotton asked Intel if Tan had divested from the companies to eliminate any potential conflict of interest.

Trump said on the Truth Social platform Thursday that, “The CEO of Intel is highly CONFLICTED and must resign, immediately. There is no other solution to this problem. Thank you for your attention to this problem!”

Tan was named Intel CEO in March and it is unclear if he has divested his interests in the chip companies.

Tan said in a message to employees that there was misinformation circulating about his past roles at Walden International and Cadence Design Systems and said that he’d “always operated within the highest legal and ethical standards.”

After a Monday meeting with Tan at the White House, Trump backed off his demand that Tan resign without hesitation.

“I met with Mr. Lip-Bu Tan, of Intel, along with Secretary of Commerce, Howard Lutnick, and Secretary of the Treasury, Scott Bessent,” Trump wrote in a Truth Social post. “The meeting was a very interesting one. His success and rise is an amazing story. Mr. Tan and my Cabinet members are going to spend time together, and bring suggestions to me during the next week. Thank you for your attention to this matter!”

Shares of Intel rose gained more than 3% in premarket trading.

FILE – The Intel logo is displayed on the exterior of Intel headquarters in Santa Clara, Calif., Jan. 12, 2011. (AP Photo/Paul Sakuma, File)

The economic and political rivalry between the U.S. and China are increasingly focused on computer chips, AI and other digital technologies that are expected to shape future economies and military conflicts.