Ahead this week highlights.: The US Wholesale Inventories , Inflation Rate, Fed Beige Book, Initial jobless Claims, as well as the Earnings will Start
With the Federal Reserve set to raise interest rates, equities must navigate job data and an earnings season that could be risky.
The S&P 500 gained 15.9% in the first half despite recession fears and a U.S. financial crisis. The Nasdaq Composite rose 31.7% for its greatest first-half gain in 40 years.
Multiple signs indicate equity optimism. The American Association of Individual Investors survey has revealed above-average positive sentiment for four weeks, while bank positioning indicators show investors boosting their equity exposure.
The Cboe Volatility Index, which monitors investor demand for stock swing protection, dropped to its lowest level since early 2020.
July also has market-moving events. Next Friday’s U.S. employment data will show investors how the economy is doing after 500 basis points of Fed rate hikes since last year, its most aggressive tightening in decades.
Continued job growth could support the belief that the U.S. economy can avoid a serious recession despite the Fed’s tightening, which has supported markets this year.
Main global factors for the week Ahead
Global Events
This week: US CPI, PPI, initial jobless claims, monthly budget statement; UK jobless claims, unemployment, industrial production, manufacturing production; China PPI, CPI, and trade balance data.
India will report CPI and wholesale inflation this week. Industrial production and trade balance will be reported.
US Inflation numbers
On Wednesday, the consumer price index is forecast to rise 3.1% annually in June, the weakest growth since March 2021. Core CPI, which excludes food and fuel costs, is forecast to rise 5% annually, down from 5.3% in May but still above the Fed’s 2% objective.
The Fed will likely raise rates later this month after Friday’s June jobs report. June saw the fewest jobs added in two-and-a-half years, but solid wage growth signaled a tight labor market.
Minneapolis Fed president Neel Kashkari, Cleveland Fed president Loretta Mester, San Francisco Fed president Mary Daly, and Fed Governor Christopher Waller will also address investors this week. Wednesday is Fed Beige Book day.
Key inflation measures will indicate the central bank’s next step. The consumer price index (CPI) data, which tracks price changes over time, is released Wednesday. After the hot ADP data, CPI matters. The Street wants to see yearly price hikes drop to prove the Fed’s plan is working. The producer price index (PPI) will report producers’ selling prices on Thursday. As corporations take steps to maintain profit margins, the PPI can foretell future consumer price changes.
Earnings Start
Wells Fargo and the large banks publish second-quarter profits Friday. Management conversations with investors are crucial for real-time economic information. Our thinking is two-fold: One, we get far stronger insight into various industries and the dynamics within them, such as end-market demand, supply chain dynamics, who is gaining market share and who is losing it—the type of granular, up-to-date detail that isn’t usually available with backward-looking macroeconomic data; and two, management teams provide a forecast that can help guide our investing decisions. Delta (DAL), PepsiCo (PEP), and Conagra (CAG) results on Thursday will reveal consumer sentiment.
FactSet estimates that S&P 500 earnings fell 6.8% in the second quarter, the largest drop since the COVID-19 pandemic. At the end of March, analysts predicted a 4.7% drop. 67 companies provided negative guidance and 46 positive guidance.
The Producer Price Index (PPI)
On Thursday, the Producer Price Index (PPI) will measure wholesale and manufacturing inflation. Producer prices rose 0.2% in June after decreasing 0.3% in May. The yearly rise was likely 0.2%, the lowest since September 2020 and compared to a peak of 11.7% in March of last year.
China
China’s inflation and trade data this week will likely show that the world’s second-largest economy’s post-COVID recovery is faltering due to deflationary pressures, high youth unemployment, and weak foreign demand.
Monday’s June inflation report is projected to show 0.2% annual inflation, while Thursday’s trade data is expected to show exports decreased again.
Beijing is fighting Washington over high-tech trade while struggling economically.
Beijing has restricted chip-making metal exports after months of U.S. and allies increasing import restrictions. Washington is considering restricting Chinese cloud-computing access.
Central Bank decisions
After Friday’s good jobs report, economists expect the Bank of Canada to raise rates again on Wednesday.
After holding rates since January, the BoC hiked rates to a 22-year high of 4.75% last month due to sustained inflation.
Wednesday brings updated BoC economic estimates.
Despite nine rate hikes totaling 450 basis points since March 2018, the economy is strong.
After ending its tightening cycle, the Reserve Bank of New Zealand will maintain rates at its Wednesday meeting.
Oil prices
On Friday, Brent and U.S. West Texas Intermediate crude (WTI) rose 5% to their highest levels in nine weeks.
Supply concerns and technical buying outweighed concerns that rate hikes would hinder economic growth and lower oil consumption.
We’re nearing a massive upside breakout. Phil Flynn, Price Futures Group analyst, told Reuters, “I think you’re seeing some short covering here today… because a lot of people have been betting on the short side.”
OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, lowered output by 5 million barrels per day (bpd) last week, or 5% of world oil demand.
After the good U.S. jobs report fueled Fed rate hike expectations, the dollar fell to a two-week low, supporting oil prices.
Oil demand may rise if the dollar weakens and other currencies become cheaper.
Economic calendar for week
Monday, July 10
Wholesale Inventories (May)
Consumer Inflation Expectations (Jun)
Used Car Prices (Jun)
Tuesday, July 11
NFIB Business Optimism Index (Jun)
IBD/TIPP Economic Optimism Index (Jul)
Euro Area ZEW Economic Sentiment Index (Jul)
Wednesday, July 12
Consumer Price Index (CPI) Inflation (Jun)
Fed Beige Book Release
China Trade Balance (Jun)
Thursday, July 13
Producer Price Index (PPI) Inflation (Jun)
U.K. Gross Domestic Product – MoM Rate (May)
Friday, July 14
University of Michigan Consumer Sentiment Index – Preliminary Reading (Jul)
Global economic calendar for week ahead
MONDAY
U.S.A.
Wholesale Inventories (May)
Japan
Current Account (May)
China
Inflation, PPI (Jun)
Tuesday
USA
Inflation Rate (Jun) MBA Mortgage Applications, API & EIA Crude Oil Stock Change (for week week ended July 7), Fed Beige Book.
JAPAN
Machine Tool Orders (Jun)
Wednesday
USA
NO EVENTS
Japan
Machinery Orders (May) PPI (Jun)
Thursday
USA
PPI(jun), Initial jobless Claims (for ended July 8);
Euro Area
Industrial Production (May), Eurogroup Meeting
CHINA
Balance of Trade (Jun)
Friday
USA
Export & Import Prices (Jun)
EURO ZONE
Balance of Trade (May)
Japan
Industrial production (May)
EARNINGS CALENDAR
MONDAY JULY 10
WD-40 Company (WDFC) and PriceSmart Inc. (PSMT) report earnings
TUESDAY JULY 11
Washington Federal Inc. (WAFD), Winmark Corp. (WINA), and MillerKnoll Inc. (MLKN)
THURSDAY JULY 13
PepsiCo. (PEP), Cintas Corp. (CTAS), Fastenal Company (FAST), Delta Air Lines (DAL), and ConAgra Brands Inc. (CAG)
Friday, July 14
UnitedHealth Group (UNH), JPMorgan Chase (JPM), Wells Fargo & Company (WFC), BlackRock (BK), Citigroup (C), State Street Corporation (STT), and Ericsson (ERIC)