Indices
- Dow 44,946, +771 or +1.75%.
- Nasdaq 21,622, +172 or +0.81%.
- S&P 6,449, +60 or +0.94%.
- MSCI EAFE 2740.21, +60.45 or +2.26%.
- USD10Y4.328%, +4.3bp or +1.00%.
- WTI Crude $62.80bbl, -$0.55 or -0.87%.
Markets Love CPI, Ignore PPI Data
On Tuesday the July Consumer Price Index (CPI) was released and registered a +0.2% increase from June, in line with market expectations. Investors poured into the market (setting back-to-back record closes on the S&P and Nasdaq on consecutive days) as expectations for a September rate cut soared on the news. However, while the report met consensus estimates, it is worth noting that CPI has now risen +0.6% over the last three months and year-over-year CPI is at +2.7%, well beyond the Fed’s target of 2%. This trend was confirmed two days later when the Producer Price Index (PPI), which measures wholesale prices,showed a jump in prices not seen since 2022 of +0.9% vs consensus estimates of +0.2% and last month’s +0.0% print. While the PPI release did throw some cold water on the market rally, all three indices finished higher for the second consecutive week. Probability markets are undeterred, showing an 84.6% chance that the Fed will cut at least 25 basis points at its next meeting in September. The Fed July meeting minutes will be released this week, which will give the markets further insight, but it is important to note that the meeting took place before the CPI and PPI numbers were released.
As earnings season winds down it is interesting to note that of the92% of S&P 500 companies that have already reported this quarter, almost 82% have surpassed Wall Street’s expectations, according to FactSet.
The Upcoming Week: Aug 18 – Aug 22
It’s retail week! Home Depot (WMT), Lowe’s (LOW), Walmart (WMT), Target (TGT), and Ross Stores among others all report earnings.
The economic calendar is light although on Wednesday, the Fed’s minutes from their July meeting will be heavily scrutinized for clues as to the direction they may take at their next meeting in September.
Economic Calendar
- Monday – N/A. Earnings: N/A.
- Tuesday – N/A. Earnings: Home Depot (HD).
- Wednesday – July FOMC minutes. Earnings: Lowe’s (LOW), Target (TGT), TJX (TJX).
- Thursday – Initial Jobless Claims, August Flash U.S. S&P Services and Manufacturing PMI, July Leading Economic Indicators. Earnings: Walmart (WMT), Ross Stores (ROST), Zoom Communications (ZM).
- Friday – N/A. Earnings: BJ Wholesale (BJ).
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