A series of inflation reports due out this week could make or break the market’s summer momentum.
Investors will get the latest gauge of how fast prices are rising in the US economy from three releases in the coming days: PPI, CPI and unit labor costs.
The readings are expected to influence how Federal Reserve officials proceed with the rate hike cycle and will be closely watched after Friday’s monster jobs report suggested more aggressive hikes may be warranted by slow down the economy
The U.S. economy added 528,000 jobs in July, according to the Labor Department, more than double what economists had expected amid expectations that job growth will slow as monetary conditions further tightening and company layoffs fueled fears of a recession.
In addition, the figure marked the full recovery of the labor market to its pre-pandemic level.
For investors, the report implied that labor conditions remained strong enough for the Federal Reserve to continue raising interest rates.
Stocks ended mixed on Friday as investors mulled the report. The tech-heavy Nasdaq fell 0.5% and the S&P 500 fell 0.2%, while the Dow rose 0.2%.
Economists at Bank of America called the report “a double-edged sword,” implying a lower risk of a recession but a higher risk of a hard landing later.
“The July jobs report was an absolute knockout, a huge surprise to the upside relative to my expectations and indeed much of the labor market data released to date,” he wrote Renaissance Macro Research’s US chief economist Neil Dutta said in a note. It is premature to talk about a recession and a pivot in monetary policy.”
He added that “this jobs report is consistent with an inflationary boom. The Fed has a lot more work to do and, in a strange way, that the Fed needs to be more aggressive in raising rates, makes the hard landing scenario more likely.”
The unusually tight labor market has been a focal point for Fed officials, with the imbalance between job offers and available workers putting upward pressure on wages and exacerbating inflationary pressures.
The story continues
Labor force participation fell slightly last month to 62.1% from 62.2% in June. Meanwhile, average hourly earnings rose 0.5% for the month, more than June’s upwardly revised monthly wage gains of 0.4%. On a year-over-year basis, profits rose 5.2%, the same as June’s year-over-year increase.
U.S. Federal Reserve Chairman Jerome Powell attends a news conference in Washington, DC, the United States, on July 27, 2022. (Photo by Liu Jie/Xinhua via Getty Images)
Pantheon Macroeconomics Chief Economist Ian Shepherdson noted that labor force participation has stagnated, and the male rate has fallen markedly for reasons that are still unclear.
“At the same time, labor demand has softened but remains strong, allowing wage gains to develop renewed traction,” Shepherdson wrote in a note to clients. “This, in turn, means we will have to raise our forecast for the wage-sensitive components of core CPI and PCE.”
July’s core consumer price index is expected to moderate slightly on Wednesday, helped mainly by lower gas prices. However, the figure is still expected to show inflation rising at the highest rate in four decades.
“Falling gas prices should ease July CPI inflation, although we expect core price pressures to remain firm,” Bank of America said in a note on Friday.
Economists polled by Bloomberg had forecast that the broader CPI measure rose 8.7 percent in July, a figure that would mark a slight pullback from June’s 9.1 percent. For the month, the CPI is expected to show an increase of 0.2%, compared to 1.3% last month.
But the core measure of the index, which excludes volatile food and energy prices, likely accelerated to an annualized 6.2%, compared with 5.9% in the previous month.
Wholesale, the producer price index, or PPI, which measures the change in prices paid to US producers of goods and services, is expected to have cooled. On a monthly basis, economists forecast that the PPI for July rose by an expected 0.3% compared to 1.1% in the previous month and by an expected 10.4% on the year compared to 11 .3% of June.
Elsewhere in the inflation releases, investors will evaluate readings on unit labor costs or the sum of all wages paid to employees and results from the University of Michigan survey of inflation expectations.
On the earnings side, the reporting season is winding down, with roughly 87% of S&P 500 companies reporting actual results for the second quarter year to date.
There are still a few more notable reports ahead, with earnings from names like Disney, (DIS), Coinbase (COIN), Tyson Foods (TSN), and Rivian Automotive (RIVN).
economic calendar
Monday: There are no featured reports scheduled for release.
Tuesday: NFIB Small Business Optimism, July (89.5 expected, 89.5 last month), Nonfarm Productivity, second quarter preliminary (-4.5% expected, -7.3% last quarter), Unit labor costs, preliminary for the second quarter (9.5% expected, 12.6% during the previous quarter). quarter)
Wednesday: MBA mortgage applications, week ended August 5 (1.2% over the previous week), July consumer price index (0.2% expected, 1.3% over the previous month), CPI without food and energy, month-on-month, July (0.5% expected, 0.7% during the previous month), year-on-year CPI, July (8.7% expected, 9.1% during the month previous), CPI excluding food and energy year-on-year, July (6.2% expected), 5.9% during the previous month), CPI NSA Index, March (296.584 expected, 296.311 during the previous month), CPI Core Index SA, July (295,686 forecast, 294,354 over the previous month), Actual average hourly earnings, YoY, July (-3.6% over the previous month, revised to -3.4%), Actual average weekly earnings, YoY, July (- 4.4% over the previous month, revised to -4.0%), Wholesale Inventories, month over month, end of June (-1.9% expected, 1.9% over the previous month), Sales of wholesale trade, month to month, June (0.5% during the previous month), Statement of the budget st monthly ($-88.8 billion)
Thursday: Initial Jobless Claims, Week Ended Aug. 6 (265,000 Expected, 260,000 Last Week), Continuing Claims, Week Ended July 30 (1.425 Million Expected, 1.416 Last Week), PPI Final Claim, Month month on month, July (0.3% expected, 1.1% on previous month), PPI excluding food and energy, month on month, July (0.4% expected, 0.4% on previous month), PPI excluding food, energy and trade, month-on-month, July (0.4% forecast, 0.3% over the previous month), PPI final demand, y-o-y, July (10.4% forecast, 11.3% over the month previous), PPI excluding food and energy, year-on-year, July (7.7% expected, 8.2% in the previous month), PPI excluding food, energy and trade, year-on-year, July (5.9% expected, 6, 4% during the previous month)
Friday: Import Price Index, month-on-month, July (-0.9% expected, 0.2% on previous month), Import Price Index excluding Oil, month-on-month, July (-0, 4% over the previous month), Import Price Index, YoY, July (expected 9.5%, 10.7% over the previous month), Export Price Index, month over month, July (-1 .0% expected, 0.7% over the previous month), export price index, year over year -year, March (18.2% over the previous month), Bloomberg August United States Economic Survey, University of Michigan Consumer Sentiment, preliminary August (52.4 expected, 51.5 for the previous month), U. of Mich. Current conditions, preliminary August (57.5 expected) , 58.1 during the previous month), U. of Mich. Expectations, preliminary August (48.8 projected, 47.3 last month), U. of Mich. 1-year inflation, preliminary August (5.1% expected, 5.2% during the previous month), U 5-10-year inflation, preliminary August (2.8% expected, 2.8% during the previous month)
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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 (SWACH), 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)
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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