Last week, the S&P 500 delivered both its worst and best single-day performances of the year, underscoring Wall Street’s mounting unease.
On Monday, recession fears and overseas sell-offs sparked a volatility surge, sending the S&P 500 down 3%. By Thursday, the market staged its strongest rally since 2022, climbing 2.3%—a rebound triggered by a seemingly innocuous weekly unemployment report. This seesawing has left businesses on edge.
DataTrek co-founder Nicholas Colas noted that such a dramatic rebound after jobless claims data “says more about the market’s fragile state and nervousness about economic data than anything else.” Neil Dutta, head of economics at Renaissance Macro, echoed this sentiment, observing that “Markets are clearly on edge.”
The upcoming week promises more fuel for the fire, with inflation data and retail sales figures poised to take center stage. Expectations are for the Consumer Price Index (CPI) to show a modest 0.2% increase in July, with consumer prices likely up 3% year-over-year. Core prices are anticipated to rise 3.2%, slightly below June’s 3.3%.
Retail sales, excluding autos and gas, are projected to have grown by 0.2% month-over-month in July, a slowdown from June’s 0.8% increase. Michael Gapen, Bank of America’s head of economics, pointed out that while a softer retail sales figure might not thrill markets, it still signals strong consumer spending for the quarter.
Gapen also suggested that if the data aligns with expectations, markets might reduce the odds of significant interest rate cuts this year, particularly in September.
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