US Inflation Report’s Potential Impact on Stocks and Fed Decisions

Last updated: July 8, 2024

burning moneyThis week’s inflation report and the onset of Q2 earnings season could have major implications for the stock market.

Following a holiday-shortened week where stocks soared near record highs, investors are keenly awaiting June’s Consumer Price Index (CPI) report on Thursday, anticipating that it might prompt the Federal Reserve to cut interest rates in September.

Amidst slowing job growth, Federal Reserve Chair Jerome Powell’s upcoming testimony before the Senate Banking Committee and the House Financial Services Committee will also be under the spotlight.

Investors hope for clues on future policy moves ahead of the Fed’s July 30-31 meeting.

On the corporate front, heavyweights like JPMorgan, Wells Fargo, and Citi will kick off the Q2 earnings season on Friday morning, with PepsiCo and Delta Air Lines set to report earlier in the week. Last week saw the S&P 500 rise nearly 2%, while the Nasdaq rallied over 3%, both hitting record highs. The Dow Jones, lagging all year, posted a modest 0.5% gain.

Despite an unexpected rise in job additions in June, the labor market shows signs of cooling, with the unemployment rate hitting 4.1% and job gains for April and May revised downward.

This labor market cooling strengthens the case for a potential Fed rate cut in September, with economists like Oxford Economics’ Nancy Vanden Houten and Renaissance Macro’s Neil Dutta forecasting rate cuts based on recent data.

The June CPI report, expected on Thursday, will be a critical indicator. Economists predict a 3.1% annual rise in headline inflation for June, down from 3.3% in May, marking the slowest year-over-year inflation since July 2022. Core CPI, excluding food and energy, is forecast to remain steady at 3.4%.

Earnings season puts financials in the limelight, with 40% of S&P 500 companies from this sector set to report. Despite being seventh in earnings growth forecast among sectors, regional banks remain a concern, expected to report a 26% year-over-year decline.

As investors navigate this week’s economic and corporate news, the broader market’s future trajectory hinges on the delicate balance of inflation, business, labor market dynamics, and Federal Reserve policies.

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Co-Founder & Chief Editor
Jon Morgan, MBA, LLM, has over ten years of experience growing startups and currently serves as CEO and Editor-in-Chief of Venture Smarter. Educated at UC Davis and Harvard, he offers deeply informed guidance. Beyond work, he enjoys spending time with family, his poodle Sophie, and learning Spanish.
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LJ Viveros has 40 years of experience in founding and scaling businesses, including a significant sale to Logitech. He has led Market Solutions LLC since 1999, focusing on strategic transitions for global brands. A graduate of Saint Mary’s College in Communications, LJ is also a distinguished Matsushita Executive alumnus.
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