The stock market’s first week after the Big Tech earnings extravaganza went about as well as any investor could have hoped. The initial mixed bag of earnings gave way to general bullishness as AI’s spending worries receded somewhat.
And with Friday’s jobs report surprise, Fed rate bets were recalculated, sending stocks to the weekend on a high note.
The S&P 500 (^GSPC) closed out Friday up 0.6%, putting the index back into record-high territory.
As we putter through the back nine of this quarter’s earnings season, our focus will continue to be split between the drip of more companies opening their books and the economic data that will hopefully calibrate a Fed on the edge between holding and hiking rates.
Wednesday’s Consumer Price Index release is circled on the calendar, with economists expecting it to rise 0.2% — both the overall and core figures (no energy, no food). Thursday will see the wholesale version, with the Producer Price Index expected to also rise faster than last month. The week’s economic data will close with a reading on retail sales and U. Mich.’s consumer survey data on Friday.
On the corporate side, a calmer calendar includes results from CAVA Group (CAVA) on Tuesday, cloud infrastructure players Nebius Group (NBIS) and Cerebras Systems (CBRS) on Wednesday, and Applied Materials (AMAT) on Thursday.
Crucial inflation reports set the tone for future rate hikes
Every inflation print can change the narrative. But this week’s CPI and PPI readings are even more important.
Fed officials are already in disagreement over where to take interest rates next. And last week’s stinker of a jobs report splashed another helping of ambiguity into the mix.
A lousier-than-expected labor snapshot may have cooled the need for an imminent rate hike — the unemployment rate ticked down even as the economy shed jobs. But the central bank’s renewed focus on inflation means officials could be compelled to start tightening again by hotter-than-expected numbers, or even ones in line with expectations.
Bank of America’s Stephen Juneau mused on Friday that last month’s CPI was likely a “one-off” and that a “report in line with our expectations would strengthen the case for the Fed hiking in September.”
The new Fed chair’s challenges resemble those Powell faced. But with a subdued labor market still giving little meaningful signal (i.e., more than one report) that it’s too hot or too cold, stubborn pricing pressures are likely to again play the deciding factor.
Consumer price inflation figures will arrive on Wednesday, followed by producer prices on Thursday. Economists expect both to rise somewhat, but just as Friday’s news showed us, the real thing we’re watching for is a surprise.
