US stocks were up on Tuesday after the producer price index for July showed wholesale inflation rose less than expected.

Data from the Bureau of Labor Statistics showed that producer prices increased 0.1% last month compared to estimates of 0.2%. On an annual basis, PPI rose 2.3%, a significant decline from June's 2.7%.

The cooler-than-expected reading should boost optimism for consumer prices to show a decline in inflation when the consumer price index is released on Wednesday.

That would keep the door open for the Federal Reserve to loosen monetary policy at its next meeting after holding rates steady for the last year. Odds of an extra-large 50 basis point cut are now slightly ahead of the odds of a smaller, more typical 25 basis point reduction at the September Federal Open Market Committee meeting, according to the CME FedWatch tool .

"The PPI data this morning came in lower than expected – across the board – which is good news for those investors that worried the Fed would have to be more cautious in lowering interest rates due to lingering inflation," Chris Zaccarelli, CIO of Independent Advisor Alliance, said Tuesday.

"If tomorrow's CPI report comes in lower than expected, like this morning's PPI report did, then the Fed truly has a green light to cut rates by 50 bps at their next meeting if they deem it necessary to quickly get back to neutral in the face of a looming slowdown in the economy."

Shares of Home Depot dropped Tuesday morning as the home improvement retailer slashed its earnings guidance for the full year on slower consumer demand. The company joins a growing list of big firms that have cited weaker spending in cutting outlooks for the coming quarters.

Investors will get a fuller picture of consumer health on Thursday with retail sales data for July. Bank of America analysts wrote in a note that they expect the data to show healthy spending, keeping the US on track to avoid a recession.

"In our view, the trajectory of retail spending growth points to a soft landing for the economy. Therefore, we think investors should expect Fed cuts to be slow and steady - at a pace of 25bp per quarter, starting in September - rather than fast and furious."

Here's where US indexes stood shortly after the 9:30 a.m. opening bell on Tuesday:

Here's what else is going on:

In commodities, bonds, and crypto:

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