Some key inflation measures next week could bolster 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, a recently improved inflation picture has investors hoping the Federal Reserve could soon start cutting interest rates. While the central bank indicated in its latest “dot” of individual forecasts that it would cut by just a quarter of a percentage point in 2024, markets are currently pricing in two, with the first coming in September, according to the CME FedWatch Tool. Those hopes have risen recently amid signs of a cooling — but not a collapse — labor market. On Friday, the June nonfarm payrolls report, for example, showed the U.S. economy added more jobs than economists expected. However, it also showed an unexpected rise in the unemployment rate, to 4.1% from 4%, or its highest level since October 2021. Next week’s inflation data is generally expected to show that this narrative remains intact. If the consumer and producer price indices, due on Thursday and Friday respectively, continue to show easing prices, this could further strengthen the possibility that the central bank will begin to ease monetary policy. That would be a bullish development for investors worried that the stock’s rally will soon run out of steam. “Any positive moves would obviously have a very strong impact on the market,” said Mark Malek, chief investment officer at SiebertNXT. “Everyone is looking [a] continued trend, downward trend, in inflation. So that’s going to be something we’re going to watch very, very closely.” .SPX YTD mountain S & P 500 On Friday, the S & P 500 was 2% higher for the week, marking its fourth win In the last week, the The Dow Jones industrial average rose 3.1% last month, up from a 3.3% gain the previous month housing outside of the CPI have shown that shelter inflation rose 0.4% month-on-month and 5.4% year-on-year, while other key figures eased with how slowly the moderation in many of the real-time housing indicators it’s kind of filtered through the CPI measures with housing inflation,” said Ross Mayfield, investment strategist at Baird. “If there’s a coverage where the shelter CPI, the rent equivalent, it’s kind of catching up to what we’re seeing on the list. Zillow or Condos or any of the other real-time rent indices, there may be some downward or unexpected downward pressure on the CPI.” “I don’t know if it will be this month, but I think there will be a month when that happens,” Mayfield added. “If you [get] CPI below 3%, I think is going to be a real kind of risk for the markets.” Investors will also look to Friday’s producer price index, which boosted stocks last month after the latest reading showed unexpected signs of deflation. The CPI is a measure of wholesale prices received by domestic producers and can be taken as a leading indicator of where inflation is headed, up from 2.2% in the previous reading, the University of Michigan’s climate index due out next Friday will give investors insight into how consumers feel about the economy, including their expectations about inflation will come as the S&P 500 continues to hit all-time highs, albeit during a trading week that has dipped by the duration of the holiday usually defined by lower trading volume, a sell-off is on the horizon, but many differ on how to position their portfolios from here. Some expect this is the time to hang on to market leaders, large-cap tech stocks that boast rosy growth prospects thanks to optimism around artificial intelligence, as well as fortress balance sheets that make them defensive plays in an uncertain economic environment. perspective. But others say it’s time for investors to start diversifying their bets in the event of a pullback, especially for those with a long-term horizon worried about current valuations. “The markets are concentrated, but a lot of portfolios are also concentrated. So it’s important to have diversification,” David Kelly, chief global strategist at JPMorgan Asset Management, told CNBC’s “Squawk on the Street” on Friday. “Not because we see any imminent threat, but because eventually something will go wrong.” Also next week, the second quarter earnings season will kick off with some major bank results. Citigroup, Wells Fargo and JPMorgan Chase are set to report. PepsiCo and Delta Air Lines will also give investors consumer information on Thursday. Week Ahead Calendar All times ET. Monday, July 8 3 p.m. Consumer Credit (May) Tuesday, July 9 6 am. NFIB Small Business Index (June) Wednesday, July 10 10 a.m. Wholesale Stocks Final (May) Thursday, July 11 8:30 am. Consumer Price Index (June) 8:30 am Initial Claims (07/06) 2 p.m. Treasury Budget (June) Earnings: Delta Air Lines , PepsiCo , Conagra Friday, July 12 8:30 am Producer Price Index (June) 10 am. : Citigroup , Wells Fargo , JPMorgan Chase , Fastenal , Bank of New York Mellon
