Last week’s non-farm payrolls report came in weaker than expected, highlighting a softer U.S. labor market.
To make matters worse, data from the previous two months were revised down, indicating that the economy’s strength might have been overstated.
While this sounds bleak, it also reinforces expectations for a Fed rate cut later this month. However, beneath this optimism for monetary easing lies a troubling reality: the economy is weaker than it seems.
Here’s what to watch this week as the market prepares for more potential shifts.
1. Presidential Debate
On Tuesday, the political stage will take center focus, and while the debate itself isn’t directly tied to the markets, the economy is expected to be a key topic.
With a critical rate decision looming and elections approaching, any economic stance from the candidates could move markets.
Traders will be watching closely for any signals that might shape the next few months of trading.
2. CPI – Inflation’s Pulse
Wednesday morning brings the week’s first major event—CPI data.
With inflation cooling, a softer-than-expected reading could fuel optimism in the markets, strengthened by expectations for a rate cut.
On the other hand, if inflation comes in higher than expected, it might trigger selling. Still, any downturn could be short-lived as the focus shifts to the upcoming Fed meeting.
3. PPI – Inflation’s Close Cousin
Following CPI, Thursday’s PPI data will offer another gauge of inflation.
Like the CPI, cooler numbers could encourage market gains, while hotter readings could dampen sentiment.
However, any declines may be brief with the potential for a rate cut still on the horizon.
It’s important to remember that both CPI and PPI track inflation’s rate of change—so even if they come in lower, prices are still rising, just at a slower pace.
4. 30-Year Bond Auction – A Window Into Investor Sentiment
Also on Thursday is the 30-year bond auction. Many see the bond market as a bellwether for broader economic trends.
Investors will be closely watching the results for clues about large-scale expectations for rate cuts.
A weak auction could signal hesitation, while a strong showing might indicate confidence in the Fed’s shift toward rate cuts.
5. University of Michigan Sentiment – The Consumer’s Outlook
Closing out the week on Friday is the Preliminary University of Michigan Sentiment report. While it may not drive major market moves, it provides a snapshot of how consumers view the economy’s trajectory.
This can act as a barometer for consumer confidence and spending, both critical components in gauging business health and future economic trends.
One caveat: the report is based on a relatively small sample size of about 500 people.
In a market balancing between hope and uncertainty, every data point is under scrutiny.
Investors and analysts alike will be paying close attention to these key events as the economy’s future continues to unfold.
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