Inflation will be in focus in the week ahead as stocks try to maintain record highs | Wilnesh News
Some key inflation data in the coming week could support the case for a rate cut in September, as investors consider how long stocks can sustain their rally to record highs. After a rocky start to the year, recent improvements in inflation have given investors hope that the Federal Reserve may soon begin cutting interest rates. According to data from CME Group’s FedWatch tool, the market is currently pricing in two percentage points for the first quarter of 2024, although the central bank said in its latest personal forecast “dot plot” that it would be reduced by just a quarter of a percentage point in 2024. Will appear in September. Those hopes have only grown recently amid signs that the labor market is cooling but not collapsing. For example, the June non-farm payrolls report released on Friday showed that the U.S. economy added more jobs than economists expected. But it also showed an unexpected rise in the unemployment rate, which rose to 4.1% from 4%, the highest level since October 2021. If the consumer price index and producer price index, due to be released on Thursday and Friday respectively, continue to show easing price pressures, this may further solidify the possibility that the central bank will start to ease monetary policy. This would be a bullish development for investors worried that the stock market rally could soon run out of steam. “Any positive move will obviously have a very strong impact on the market,” said Mark Malek, chief investment officer at SiebertNXT. “Everyone is looking for a continued trend, a downward trend in inflation. So that’s something we’re going to be watching very, very closely.” ” .SPX YTD Mountain S&P 500 Index rose 2% for the week on Friday, marking its fourth weekly gain in the past five weeks. The Dow Jones Industrial Average rose 0.7% and the Nasdaq rose 3.5%. Stubborn Inflation Patch Headline consumer price index data is expected to improve slightly in June. Economists polled by FactSet expected CPI to rise 3.1% year-on-year last month, down from the previous month’s 3.3% gain. But investors will be particularly concerned about any improvements in core services, particularly housing costs, where inflation remains particularly troublesome – even as other more frequent housing data outside of the consumer price index show weakness. For example, housing inflation rose 0.4% in May from the previous quarter and 5.4% year-on-year, while other key items fell. “I think the slowdown in many of the immediate housing indicators is filtering through into the CPI indicator in the form of housing inflation,” said Ross Mayfield, investment strategy analyst at Baird. Some surprises. “If the CPI for housing, owner-equivalent rents, goes down, or goes down to the levels that we see on Zillow or apartment listings or any of the other instant rental indicators, then there could be some drops or surprises. CPI pressure. “I don’t know if it will be this month, but I think there will be a month when that happens,” Mayfield added. “If CPI falls below 3%, I think it will be a real risky time for the market.” Investors will also analyze Friday’s producer price index, which rose after the latest data showed unexpected signs of deflation. buoyed the stock market last month. The PPI is a measure of wholesale prices received by domestic producers and can be used as a leading indicator of the direction of inflation. PPI is expected to rise slightly in June. Economists polled by FactSet expected June growth to be 2.3%, up from the previous reading of 2.2%. On the other hand, the University of Michigan’s sentiment index, due to be released next Friday, will give investors insight into how consumers feel about the economy, including expectations for inflation. Stick with Winners or Diversify Next week will be a busy calendar as the S&P 500 continues to hit record highs, albeit during a holiday-shortened trading week that typically sees lower volumes. The broader index is now up more than 16% in 2024. Some expect now is the time to stick with market leaders, Big Tech stocks that have buoyant growth expectations due to optimism about artificial intelligence and fortress-like balance sheets that give them leverage amid an uncertain economic outlook. Defensive. However, others say that if a pullback occurs, now is the time for investors to start diversifying, especially for those with a long-term focus on current valuations. “The market has become concentrated, but a lot of portfolios have also become concentrated,” David Kelly, chief global strategist at J.P. Morgan Asset Management, told CNBC’s “Squawk on the Street” on Friday. “So diversification is important. “Not because we see an imminent threat, but because eventually something will go wrong. ” Also next week, the second-quarter earnings season will kick off with results from some major banks. Citigroup, Wells Fargo and JPMorgan Chase are all set to release reports. PepsiCo and Delta Air Lines will also provide investors with insights on consumer spending on Thursday. Get a closer look. Ahead of the week Calendar All times Monday, July 8 at 3 p.m. ET Consumer Credit (May) Tuesday, July 9 at 6 a.m. NFIB Small Business Index (June) July 10 Wednesday 10am Wholesale Inventories End of Period (May) Thursday, July 11 8:30am Consumer Price Index (June) 8:30am Initial Jobless Claims (07/06) 2pm Treasury Budget ( June) Earnings: Delta Air Lines, PepsiCo, ConAgra Friday, July 12, 8:30 a.m. PPI (June) 10 a.m. Michigan Sentiment Preliminary (July) Earnings: Citigroup, Wells Fargo , JPMorgan Chase, Fastenal, Bank of New York Mellon
