What to know this week

A series of inflation reports coming out this week could push or disrupt the market’s summer momentum.

Investors will receive the latest indicator of how fast prices are rising in the US economy from three versions available in the coming days: PPI, CPI, and unit labor cost.

The readings are expected to affect how Federal Reserve officials proceed with the rate hike cycle and will be closely monitored after Friday’s monstrous employment report suggested more aggressive hikes may be warranted to slow the rate. ‘economy.

The U.S. economy added 528,000 jobs in July, according to the Department of Labor, a figure more than double what economists expected amid expectations that employment growth would retreat as tighter monetary conditions and corporate layoffs have fueled fears of a recession.

The figure also marked the full recovery of the labor market to the pre-pandemic level.

For investors, the report implied that working conditions had remained strong enough for the Federal Reserve to continue raising interest rates.

Shares closed mixed on Friday as investors mulled over the report. The high-tech Nasdaq was down 0.5% and the S&P 500 was down 0.2% while the Dow was up 0.2%.

Bank of America economists called the report a “double-edged sword,” implying a lower risk of recession but an increased risk of a hard landing later on.

“The July employment report was an absolute knock-out, a big surprise on the upside from my expectations and indeed much of the labor market data released up to this point,” Neil Dutta wrote in a statement. , head of the Renaissance Macro Research of the US economy. Talking about a recession and a pivot of monetary policy is premature “.

He added that “this employment report is consistent with an inflationary boom. The Fed has a lot more work to do and, in a weird way, the fact that the Fed has to get more aggressive in raising rates makes it more likely. hard landing scenario. ”

Unusual labor market rigidity has been a focal point for Fed officials, with the imbalance between job openings and available workers putting upward pressure on wages and exacerbating inflationary pressures.

Labor force participation declined slightly last month, dropping to 62.1% from 62.2% in June. Average hourly wages, meanwhile, rose 0.5% for the month, higher than June’s revised upward monthly wage increases of 0.4%. Year-on-year, earnings were up 5.2%, on par with the year-over-year increase in June.

US Federal Reserve Chairman Jerome Powell attends a press conference in Washington, DC, United States on July 27, 2022. (Photo by Liu Jie / Xinhua via Getty Images)

Ian Shepherdson, chief economist at Pantheon Macroeconomics, pointed out that labor force participation has stalled, with the rate for men falling sharply for reasons not yet clear.

“At the same time, demand for labor has eased but is still strong, allowing wage increases to develop renewed traction,” Shepherdson wrote in a note to clients. “This, in turn, means that we will have to raise our forecasts for the wage-sensitive components of the CPI and the core PCE.”

The main consumer price index for July is expected to show slight moderation on Wednesday, mainly helped by falling gas prices. The figure, however, is still expected to show inflation rising at the highest pace in four decades.

“Falling gas prices should bring some relief to July CPI inflation, although we expect core price pressures to remain firm,” Bank of America said in a statement Friday.

Economists polled by Bloomberg predict that the broader CPI measure rose 8.7% in July, a number that would mark a slight cooling from 9.1% in June. Over the course of the month, CPI is expected to show an increase of 0.2%, up from 1.3% last month.

But the index’s main measure, which excludes food and energy price volatility, is likely to have risen to 6.2% yoy, up from 5.9% the previous month.

At the wholesale level, the Producer Price Index or PPI, which measures the change in prices paid to US producers of goods and services, should have cooled. On a monthly basis, economists expect the PPI for July to have increased by 0.3% forecast from 1.1% the previous month and 10.4% forecast for the year versus 11.3% in June. .

Elsewhere in inflation releases, investors will evaluate readings on unit labor costs, or the sum of all wages paid to employees, and the results of the University of Michigan Inflation Expectations Survey.

On the earnings front, the reporting season is closing, with approximately 87% of the S&P 500 companies reporting actual results for the second quarter since the beginning of the year.

Some bigger reports are still on the way, with earnings from names including Disney, (DIS), Coinbase (COIN), Tyson Foods (TSN), and Rivian Automotive (RIVN).

Economic calendar

Monday: No noteworthy reports planned for release.

Tuesday: NFIB Small Business Optimism, July (89.5 expected, 89.5 during previous month), nonfarm productivity, second quarter preliminary (-4.5% expected, -7.3% during previous quarter), unit costs of labor, preliminary of the second quarter (9.5% expected, 12.6% during the previous quarter)

Wednesday: MBA Mortgage Applications, Week Ended Aug 5 (1.2% Previous Week), Consumer Price Index, Month-over-Month, July (0.2% Expected, 1.3% Previous Month), CPI excluding food and energy, month-over-month, July (0.5% forecast, 0.7% during previous month), CPI year-over-year, July (8.7% forecast, 9.1% during previous month), CPI excluding food and energy year over year, July (6.2% forecast, 5.9% during previous month), CPI NSA index, March (296,584 forecast, 296,311 during previous month), CPI Core SA index, July ( 295,686 forecast, 294,354 during previous month), Real average hourly earnings, year over year, July (-3.6% during previous month, revised to -3.4%), Real mean weekly earnings, year over year, July (-4.4% prior month, revised to -4.0%), Bulk Inventory, month-on-month basis, ending June (-1.9% expected, 1.9% prior month), sales wholesale, month over month, June (0.5% during l previous month), monthly balance (-88.8 billion dollars)

Thursday: Initial jobless claims, week ending August 6 (265,000 expected, 260,000 during previous week), continuing claims, week ending July 30 (1,425 million expected, 1,416 during previous week), PPI final application, month-over-month , July (0.3% expected, 1.1% previous month), PPI excluding food and energy, month over month, July (0.4% expected, 0.4% previous month), PPI excluding food , Energy and Commerce, month-over-month, July (0.4% forecast, 0.3% in previous month), PPI final demand, year-over-year, July (10.4% forecast, 11.3% in previous month) , PPI excluding food and energy, year over year, July (7.7% forecast, 8.2% during previous month), PPI excluding food, energy and trade, year over year, July (5.9% forecast, 6 , 4% during the previous month)

Friday: Import Price Index, month over month, July (-0.9% expected, 0.2% during previous month), Import Price Index excluding oil, month over month, July (-0.4 % during previous month), Import Price Index, year over year, July (9.5% expected, 10.7% in previous month), Export Price Index, month over month, July (-1 , 0% forecast, 0.7% in previous month), Export Price Index, year-over-year-year, March (18.2% in previous month), Bloombgerg August United States Economic Survey, University of Michigan Consumer Sentiment, August preliminary (52.4 expected, 51.5 during the previous month), U. of Mich. Current Conditions, August Preliminary (57.5 expected, 58.1 during the previous month), U. of Mich. Expectations, August preliminary (48.8 expected, 47.3 during the previous month), U. of Mich. 1 Year Inflation, August Preliminary (5.1% Expected, 5.2% Previous Month), U. by Mich. 5-10 years Inflation, August preliminary (2.8% expected, 2.8% in previous month)

Earnings calendar

Monday: 3D Systems (DDD), ACADIA Pharmaceuticals (ACAD), Allbirds (BIRD), American International Group (AIG), Barrick (GOLD), BioNTech (BNTX), Dominion Energy (D), Elanco Animal Health (ELAN), Energizer (ENR )), Freshpet (FRPT), GoodRx (GDRX), Groupon (GRPN), Lemonade (LMND), Marriott Vacations (VAC), News Corp (NWSA), Novavax (NVAX), Palantir Technologies (PLTR), Radware (RDRW) , SmileDirectClub (SDC), Switch (SWCH), Take-Two Interactive Software (TTWO), Tanger Factory Outlet Centers (SKT), Tyson Foods (TSN), Upstart (UPST), Vroom (VRM)

Tuesday: Akamai Technologies (AKAM), Bausch Health (BHC), Bloom Energy (BE), Capri Holdings (CPRI), Carlyle Group (CG), Coinbase (COIN), Dine Brands (DIN), Emerson (EMR), Grocery Outlet (GO), H&R Block (HRB), Hilton Grand Vacations (HGV), Hyatt Hotels (H), IAC (IAC), iRobot (IRBT), Norwegian Cruise Line (NCLH), Planet Fitness (PLNT), Ralph Lauren (RL ), Roblox (RBLX), Spirit Airlines (SAVE), Sysco (SYY), The Trade Desk (TTD), Unity Software (U), Warner Music Group (WMG), World Wrestling Entertainment (WWE), Wynn Resorts (WYNN)

Wednesday: AppLovin (APP), Coherent (COHR), Coupang (CPNG), Dutch Bros (BROS), Fox Corp. (FOXA), Jack in the Box (JACK), Red Robin Gourmet (RRGB), Sonos (SONO), Traeger ( COOK), Wendy’s (WEN), Wolverine World Wide (WWW)

Thursday: AerCap (AER), Baidu (BIDU), Brookfield Asset Management (BAM), Canada Goose (GOOS), Cardinal Health (CAH), Dillard’s (DDS), Flower Foods (FLO), LegalZoom (LZ), Poshmark (POSH), Rivian Automotive (RIVN), Six Flags (SIX), Solo Brands (SOLO), Toast (TOST), Utz Brands (UTZ), Warby Parker (WRBY), W&T Offshore (WTI), Wheaton Precious Metals (WPM)

Friday: Broadridge Financial (BR), Honest Compant (HNST), Spectrum Brands (SPB)

Alexandra Semenova is a Yahoo Finance journalist. Follow her on Twitter @alexandraandnyc

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