The July CPI report came in cooler than expected, with headline and core inflation rising 0.2 percent month-over-month and year-over-year headline data coming in at 3.2 percent. Yahoo Finance Markets Reporter Jared Blikre breaks down how markets are reacting to the report.

Video Transcript

BRAD SMITH: Inflation continues to moderate July's monthly figure on both the headline and core figure, holding steady at 2/10 of a percent. That all-important core number also ticking down on an annual basis. The report is likely to encourage those thinking the Fed won't raise rates in September. Joining us now to break this all down, we've got Yahoo Finance's reporter, Jared Blikre, down there on the floor of the New York Stock Exchange. I mean, I can clearly tell people are reading into this down there on the floor, Jared, and just running around telling all their friends.

JARED BLIKRE: There is actually a bit of excitement on the floor today. I don't know if it's CPI. Maybe they're excited about a couple of tickers. But nevertheless, it is nice to see people down here. But I do wanna talk about some of the subcomponents of CPI, especially in energy.

And I'm looking at the YFi Interactive. We have a couple of these breaking-- broken down. These are month-over-month changes. Fuel oil, that is up 3%. That's 300 basis points in one month. That is a large amount.

Gasoline, 2/10 of a percent-- quite a bit smaller, but still going in the wrong direction. Utilities up 2%. That's 200 basis points. And only electricity moving in the right direction. And that is down. That is down about 7/10 of a percent.

But a lot of these subcomponents, including fuel oil, gasoline, these guys are down 20% or so year-over-year. So we're looking at market declines in the year-over-year numbers. But my concern is that with these incremental gains in the monthly figures, have we bottomed? Are we, in fact, moving up again in inflation, especially with respect to these energy prices, which have experienced some moderation?

So sticking with the YFi Interactive here, I want to pull up crude oil. Let's do a year-to-date chart. And we can pull up some candlesticks and really see that it has finally just barely broken the upside. It broke this trading range that it had been in all year long.

But really, when you take a look at the one year, that explains some of the drop, because we're still down 8.84% year-over-year in WTI Crude. Not as much as we were at the March and May lows here. But we are, nevertheless, still down. But you'll notice over the last couple of months ticking up, so on the year-over-year basis, still looking good. But the concern is that our month-over-month, we're ticking back up again.

I can show you something pretty similar for the S&P for the Goldman Sachs Commodity Index. Here, we have-- looking back one year, we are up against this $600 resistance level. But we have accelerated to the upside over this last two-month period, a similar theme here. And then I wanna take a look at natural gas. You can see natural gas down 65% or so year-over-year.

But let's take a look at the year-to-date figures. You can see average, so slightly getting back up to that 3% or that $3 level. And that was actually reached and peaked in early March. So if we head above these current levels, it's pretty much a race to the top here.

We've seen natural gas inflation-- natural gas prices react very quickly to changes in the weather, not so much the macro environment. But it is a very volatile commodity. And we need to respect the fact that it is up substantially, itself, over the last two months. So going back to the original case here, a lot of these subcomponents just moving the wrong direction on a month-over-month basis.