Market rebound, key CPI report: A look at this week's catalysts

Yahoo

3 days ago

Stocks are coming off their best week since June, driven by strong tech earnings and hopes of a Russia–Ukraine truce.
Yahoo Finance Senior Reporters Brooke DiPalma and Jennifer Schonberger break down what's ahead, including a key Consumer Price Index (CPI) report and the Federal Reserve's next move.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief.
The AI trade has really been powering stocks higher, Brooke, and that means that the Nasdaq closed at a record on Friday. The S&P almost got there. The Dow is still a little bit below those levels.
Yeah, the momentum is expected to continue into this week. Stock futures indicate that we will see green in the early hours of trading this morning. It's three key things really drove that rebound that we saw last week, making it the best week that the US markets have seen since June, and that was largely because this rebound for weaker-than-expected jobs data from that revision of both June and May, as well as that surge in tech stocks as second-quarter earnings have really been led by big tech, and also, investors keeping a close eye on a potential truce between Russia and Ukraine, as President Trump is expected to meet with Vladimir Putin this Friday in Alaska. And what we're seeing here is that strategists indicate that there's still more room to run in this market. Citi strategists indicate that they do, or rather, they raised their target for the S&P 500. They do expect that tax cuts will offset all this negative impact that we're seeing from President Trump's tariffs, and they expect the S&P 500 to now hit 6,600 points. That's up from 6,300, but that would indicate that we need to see a 3% gain from Friday's market close until year end in order to hit this new found target from Citibank. Right now, futures indicating right now, S&P 500 sitting around 6,389. And so, that would obviously mean about a 200 plus point gain for now until year end. But right now, we're seeing lots of momentum in this market, AI really leading the trade here once again.
Yeah, and obviously, it makes sense that they're upgrading their target since the S&P was already above their target, unless they believed that we would just tread water for the rest of the year, which does not seem to be the consensus view. In terms of the catalysts this week, the most important of them, Jen, is probably going to be that CPI report.
Yeah, Julie, we're closely watching CPI, specifically core CPI, which strips out those volatile food and energy prices, and economists are expecting that to tick up to 3% for the month of July. That would be up from 2.9 from the month before that in June. And I'm watching to see whether we see goods inflation sort of pushing up that number again. Remember, Fed officials are closely watching for the impact of tariffs on inflation, and Fed Chair, Jay Powell, specifically, has said he wants to see the summer months, June, July, and August. So, we saw a little bit of an uptick in June. Here we are coming to July. We're expecting to see further uptick there. Uh, what's interesting to me, though, is that CPI tends to run a little bit hotter than PCE, the personal consumption expenditures index, which is the Fed's preferred inflation gauge. And Fed officials now see inflation topping out at 3.1% for the year based on PCE. So, it seems, and then coming back down for 2026. So, it seems like they are coming around to the idea that we're going to see a one-time increase in inflation as a result of tariffs. So, many still in that sort of wait-and-see posture to see if it will be more persistent. And we're going to hear from some Fed speakers, specifically, some hawks this week, and I'm curious to see how they interpret the new inflation data that we will get tomorrow, along with the jobs data, that weaker jobs data that we got a couple weeks ago.
And, um, we should also note that the CPI data comes from the BLS, which is the same agency that puts out the labor numbers, right? And this is as the administration is reportedly considering candidates to lead that agency as well.
Yeah, absolutely, Julie. That's another storyline that we are going to be watching as well, and we're watching to see who the president is going to put in place as the BLS commissioner. Uh, I want to note, though, on on that story, that the BLS commissioner does not have a hand in actually surveying the data. So, I'm not sure how that role may change with the new appointment or not, uh, but I think investors are going to be looking at those numbers, thinking about that in the back of their mind, for sure, as we receive that data tomorrow.
And you know, might it's not not unusual for us to get some kind of social media post from the president when we get those numbers, whatever that's going to look like.