We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
It was a noisy week of trading last week. At one point, the tech-heavy Nasdaq was down nearly -2.9% mid-week, only to see a turnaround into the green across the board with a strong session Friday. That we had been in a lighter period of economic data made the previous week’s events all the more draining: the Fed holding interest rates high til mid-September while the bottom was falling out of the labor market.
By Thursday morning of last week, we saw this was likely an overreaction. And with few pre-market reports of consequence this morning, we’re seeing these levels buoy higher — presumably based somewhat on this same notion: the Dow is +80 points ant this hour, the S&P 500 is +15 and the Nasdaq +55 points.
Economic Reports Pick Up with PPI, CPI This Week
We’re still on a relatively calm track, at least early this week. Later this afternoon, we’ll see a July Monthly Fed Budget, which is expected to slide -$20 billion to -$241 billion. By Thursday afternoon, we’ll have brought forth lots of new data, including Retail Sales, Imports and Exports, Empire State and Philly Fed surveys, Industrial Production/Capacity Utilization — and the normal Weekly Jobless Claims. Which means we’ll know a lot more about where we’re headed by then than we do now.
The biggest report of the week is Wednesday, with the Consumer Price Index (CPI) for July. Recall a month ago, we saw the first negative month-over-month prints in almost two years, -0.06%, and the single lowest month since May 2020. This is expected to rise to +0.2% on headline while remaining flat year over year. Core year over year is projected to dip 10 basis points (bps) to +3.2% — a level we haven’t seen since the spring of 2021.
CPI’s sister report, the Producer Price Index (PPI) for July, comes out Tuesday morning. Conversely with CPI data over the past year or so, PPI numbers have come in at or even below optimum inflation levels (according to the Fed) of +2%, before flowing slightly higher since. PPI is coming off +2.1% year over year on headline, +3.1% on core. Expect this wholesale inflation metric not to jump too far in either direction.
Bank Rates Clearly Expect a September Cut
When 10-year bond yields dropped to +3.71% early last week — which was arguably a harbinger for the big sell-off in the stock market, or at least for a bigger wave from the Volatility Index (VIX), it was the deepest level since Christmas of last year. (That was back when some “expert” analysts were calling for seven interest rate cuts in 2024, so you can see what’s changed since then.) We’re currently back up to +3.94%, but the narrative stays the same.
Then there’s this piece of information: the inverted yield curve between 10-year and 2-year treasury yields has not been this narrow since it first inverted 25 months ago. At -0.04% as of Wednesday of last week, it’s as clear a signal that the vast expanses between the yields — as opposed to the -0.5% we were seeing as of mid-June this year — are becoming a thing of the past. Also, mortgage rates are now as low as they’ve been in a year, currently around +6.5%, which may finally start attracting new homebuyers.
Long story short: none of these things would be occurring if the markets believed the Fed was going to keep the Fed funds rate at +5.25-5.50%. In fact, from this vista, anything less than a 50 bps cut at the Fed’s September 18th meeting will be a disappointment. Yes, we have plenty of data coming out between now and then to change people’s minds back, but things are definitely starting to get a little sunnier for the U.S. Federal Reserve.
Finally, while we see the end of Q2 earnings season on the horizon, we still have plenty of potentially impactful reports this week. These include plenty of retailers, like Home Depot ((HD - Free Report) out tomorrow morning, Chili’s and Maggiano’s parent Brinker International ((EAT - Free Report) early Wednesday, and Walmart ((WMT - Free Report) and Alibaba ((BABA - Free Report) in Thursday’s pre-market. We’ll also hear from Cisco Systems CSCO on Wednesday afternoon.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Markets Await PPI/Core PPI Data
It was a noisy week of trading last week. At one point, the tech-heavy Nasdaq was down nearly -2.9% mid-week, only to see a turnaround into the green across the board with a strong session Friday. That we had been in a lighter period of economic data made the previous week’s events all the more draining: the Fed holding interest rates high til mid-September while the bottom was falling out of the labor market.
By Thursday morning of last week, we saw this was likely an overreaction. And with few pre-market reports of consequence this morning, we’re seeing these levels buoy higher — presumably based somewhat on this same notion: the Dow is +80 points ant this hour, the S&P 500 is +15 and the Nasdaq +55 points.
Economic Reports Pick Up with PPI, CPI This Week
We’re still on a relatively calm track, at least early this week. Later this afternoon, we’ll see a July Monthly Fed Budget, which is expected to slide -$20 billion to -$241 billion. By Thursday afternoon, we’ll have brought forth lots of new data, including Retail Sales, Imports and Exports, Empire State and Philly Fed surveys, Industrial Production/Capacity Utilization — and the normal Weekly Jobless Claims. Which means we’ll know a lot more about where we’re headed by then than we do now.
The biggest report of the week is Wednesday, with the Consumer Price Index (CPI) for July. Recall a month ago, we saw the first negative month-over-month prints in almost two years, -0.06%, and the single lowest month since May 2020. This is expected to rise to +0.2% on headline while remaining flat year over year. Core year over year is projected to dip 10 basis points (bps) to +3.2% — a level we haven’t seen since the spring of 2021.
CPI’s sister report, the Producer Price Index (PPI) for July, comes out Tuesday morning. Conversely with CPI data over the past year or so, PPI numbers have come in at or even below optimum inflation levels (according to the Fed) of +2%, before flowing slightly higher since. PPI is coming off +2.1% year over year on headline, +3.1% on core. Expect this wholesale inflation metric not to jump too far in either direction.
Bank Rates Clearly Expect a September Cut
When 10-year bond yields dropped to +3.71% early last week — which was arguably a harbinger for the big sell-off in the stock market, or at least for a bigger wave from the Volatility Index (VIX), it was the deepest level since Christmas of last year. (That was back when some “expert” analysts were calling for seven interest rate cuts in 2024, so you can see what’s changed since then.) We’re currently back up to +3.94%, but the narrative stays the same.
Then there’s this piece of information: the inverted yield curve between 10-year and 2-year treasury yields has not been this narrow since it first inverted 25 months ago. At -0.04% as of Wednesday of last week, it’s as clear a signal that the vast expanses between the yields — as opposed to the -0.5% we were seeing as of mid-June this year — are becoming a thing of the past. Also, mortgage rates are now as low as they’ve been in a year, currently around +6.5%, which may finally start attracting new homebuyers.
Long story short: none of these things would be occurring if the markets believed the Fed was going to keep the Fed funds rate at +5.25-5.50%. In fact, from this vista, anything less than a 50 bps cut at the Fed’s September 18th meeting will be a disappointment. Yes, we have plenty of data coming out between now and then to change people’s minds back, but things are definitely starting to get a little sunnier for the U.S. Federal Reserve.
Q2 Earnings Season Rolls Along: Home Depot (HD - Free Report) , Cisco (CSCO), Walmart (WMT - Free Report) , Alibaba (BABA - Free Report)
Finally, while we see the end of Q2 earnings season on the horizon, we still have plenty of potentially impactful reports this week. These include plenty of retailers, like Home Depot ((HD - Free Report) out tomorrow morning, Chili’s and Maggiano’s parent Brinker International ((EAT - Free Report) early Wednesday, and Walmart ((WMT - Free Report) and Alibaba ((BABA - Free Report) in Thursday’s pre-market. We’ll also hear from Cisco Systems CSCO on Wednesday afternoon.