What you need to know this week

A series of inflation reports due this week could boost or break the market’s summer momentum.

Investors will get the latest measure of how quickly prices are rising in the US economy from three releases coming in the coming days: PPI, CPI and Unit Labor Costs.

The readings are expected to influence how Federal Reserve officials proceed with the rate-hike cycle and will be closely watched after Friday’s monstrous jobs report suggested more aggressive increases may be warranted to slow the economy. .

The U.S. economy added 528,000 jobs in July, according to the Labor Department – more than twice what economists expected as job growth expected to pull back amid tighter lockdowns. monetary conditions and company layoffs fueled fears of a recession.

Moreover, this figure marked the full recovery of the labor market to its pre-pandemic level.

For investors, the report implied that labor conditions remained strong enough for the Federal Reserve to continue raising interest rates.

Shares ended mixed on Friday as investors pondered the report. The tech-heavy Nasdaq fell 0.5% and the S&P 500 fell 0.2% while the Dow Jones rose 0.2%.

Bank of America economists called the report a “double-edged sword,” implying lower risk of a recession but increased risk of a hard landing later.

“The July jobs report was an absolute knockout blow, a major surprise to my expectations and indeed to much of the labor market data released so far,” Neil Dutta wrote. , head of macroeconomic research at Renaissance Macro in a note. Talk of a recession and a monetary policy pivot is premature.

He added that “this jobs report is consistent with an inflationary boom. The Fed still has a lot of work to do and, in a weird way, the fact that the Fed needs to get more aggressive in pushing rates up, makes the hard landing scenario more likely.” .”

The unusually tight labor market has been the focus of Fed officials’ concerns, with the imbalance between job offers and available workers putting upward pressure on wages and exacerbating inflationary pressures.

Labor force participation fell slightly last month, falling to 62.1% from 62.2% in June. Average hourly earnings, meanwhile, rose 0.5% for the month, outpacing the upward-revised monthly wage gains of 0.4% in June. On an annual basis, profits rose 5.2%, matching the year-over-year increase in June.

U.S. Federal Reserve Chairman Jerome Powell attends a press conference in Washington, DC, the United States, July 27, 2022. (Photo by Liu Jie/Xinhua via Getty Images)

Pantheon Macroeconomics chief economist Ian Shepherdson pointed out that labor force participation has stalled, with the rate among men declining markedly for reasons that are not yet clear.

“At the same time, labor demand has eased but remains strong, allowing wage gains to develop renewed traction,” Shepherdson wrote in a note to clients. “That, in turn, means we will have to raise our forecast for the wage-sensitive components of the core CPI and PCE.”

The headline consumer price index for July is expected to show a slight moderation on Wednesday, mainly helped by lower gasoline prices. The figure, however, is still expected to show inflation climbing at the fastest pace in four decades.

“Falling gasoline prices should provide some relief to July CPI inflation, although we expect core price pressures to remain firm,” Bank of America said in a statement. a note on Friday.

Economists polled by Bloomberg predict that the broadest measure of the CPI rose 8.7% in July, a figure that would mark a slight slowdown from 9.1% in June. During the month, the CPI should post an increase of 0.2%, against 1.3% last month.

But the index’s core measure, which excludes volatile food and energy prices, likely accelerated to 6.2% on a yearly basis from 5.9% the previous month.

At the wholesale level, the Producer Price Index or PPI, which measures the change in prices paid to US producers of goods and services, is expected to have cooled. On a monthly basis, economists forecast that the PPI for July rose by 0.3% expected against 1.1% the previous month and by 10.4% expected on the year against 11.3% in June.

Elsewhere in the inflation releases, investors will gauge readings on unit labor costs, or the sum of all wages paid to employees, and the results of the University of Michigan’s Inflation Expectations Survey.

On the earnings front, reporting season is winding down, with around 87% of S&P 500 companies reporting actual second-quarter earnings year-to-date.

A few more notable reports are yet to come, with earnings from names like Disney, (DIS), Coinbase (COIN), Tyson Foods (TSN), and Rivian Automotive (RIVN) on record.

Economic Calendar

Monday: No notable reports scheduled for publication.

Tuesday: NFIB Small Business Optimism, July (89.5 expected, 89.5 in prior month), Nonfarm Productivity, Preliminary Q2 (-4.5% expected, -7.3% in prior quarter), Unit Labor Costs , preliminary Q2 (9.5% expected, 12.6% in previous quarter)

Wednesday: MBA mortgage applications, week ended August 5 (1.2% in previous week), consumer price index, month over month, July (0.2% expected, 1.3% in past week). previous month), CPI excluding food and energy, month on month, July (0.5% expected, 0.7% in the previous month), CPI year-on-year, July (8.7% expected, 9 .1% over the previous month), CPI excluding food and energy, year-over-year, July (6.2% expected, 5.9% over the previous month), CPI Index NSA, March (296,584 expected, 296,311 over the previous month), CPI Core Index SA, July (295,686 expected, 294,354 over the previous month), Real Average Hourly Earnings, year-over-year, July (-3.6% over prior month, revised to -3.4%), real average weekly earnings, year over year, July (-4.4% over prior month, revised to -4.0%), inventories wholesalers, month-over-month, final June (-1.9% pre saw, 1.9% over the previous month), wholesale trade sales, month over month, June (0.5% over the previous month), monthly budget statement (-$88.8 billion)

Thursday: Initial unemployment claims, week ended August 6 (265,000 expected, 260,000 in previous week), continuing claims, week ended July 30 (1.425 million expected, 1.416 in previous week), PPI final claim , month-on-month, July (0.3% expected, 1.1% in prior month), PPI excluding food and energy, month-on-month, July (0.4% expected, 0.4 % over the previous month), PPI excluding food, energy and trade, month-over-month, July (0.4% expected, 0.3% over the previous month), PPI final demand, year-on-year, July (10.4% expected, 11.3% in previous month), PPI excluding food and energy, year-on-year, July (7.7% expected, 8 .2% in previous month), PPI excluding food, energy and trade, year-on-year, July (expected 5.9%, 6.4% in previous month)

Friday: Import price index, month-over-month, July (-0.9% expected, 0.2% in prior month), Import price index excluding oil, from a month-over-month, July (-0.4% in previous month), Import Price Index, year-over-year, July (9.5% expected, 10.7% in previous month), export price index, month-over-month, July (-1.0% expected, 0.7% in previous month), export price index , year-over-year, March (18.2% over previous month), Bloomberg August United States Economic Survey, University of Michigan Consumer Sentiment, preliminary August (52.4 expected, 51.5 au previous month), U. of Mich. Current Conditions, Preliminary August (57.5 expected, 58.1 in previous month), U. of Mich. Expectations, Preliminary August (48.8 expected, 47.3 in prior month), U. of Mich. 1 Year Inflation, August Preliminary (5.1% expected, 5.2% in prior month), U Michigan 5-10 Year Inflation, August Preliminary Data (2.8% expected, 2.8% in the previous month)

Earnings Calendar

Monday: 3D Systems (DDD), ACADIA Pharmaceuticals (ACAD), Allbirds (BIRD), American International Group (AIG), Barrick (GOLD), BioNTech (BNTX), Dominion Energy (D), Elanco Animal Health (ELAN), Energizer (ENR) ), Freshpet (FRPT), GoodRx (GDRX), Groupon (GRPN), Lemonade (LMND), Marriott Vacations (VAC), News Corp (NWSA), Novavax (NVAX), Palantir Technologies (PLTR), Radware (RDRW), SmileDirectClub (SDC), Switch (SWCH), Take-Two Interactive Software (TTWO), Tanger Factory Outlet Centers (SKT), Tyson Foods (TSN), Upstart (UPST), Vroom (VRM)

Tuesday: Akamai Technologies (AKAM), Bausch Health (BHC), Bloom Energy (BE), Capri Holdings (CPRI), Carlyle Group (CG), Coinbase (COIN), Dine Brands (DIN), Emerson (EMR), Grocery Outlet (GO), H&R Block (HRB), Hilton Grand Vacations (HGV), Hyatt Hotels (H), IAC (IAC), iRobot (IRBT), Norwegian Cruise Line (NCLH), Planet Fitness (PLNT), Ralph Lauren (RL ), Roblox (RBLX), Spirit Airlines (SAVE), Sysco (SYY), The Trade Desk (TTD), Unity Software (U), Warner Music Group (WMG), World Wrestling Entertainment (WWE), Wynn Resorts (WYNN)

Wednesday: AppLovin (APP), Coherent (COHR), Coupang (CPNG), Dutch Bros (BROS), Fox Corp. (FOXA), Jack in the Box (JACK), Red Robin Gourmet (RRGB), Sonos (SONO), Traeger (COOK), Wendy’s (WEN), Wolverine World Wide (WWW)

Thursday: AerCap (AER), Baidu (BIDU), Brookfield Asset Management (BAM), Canada Goose (GOOS), Cardinal Health (CAH), Dillard’s (DDS), Flower Foods (FLO), LegalZoom (LZ), Poshmark (POSH), Rivian Automotive (RIVN), Six Flags (SIX), Solo Brands (SOLO), Toast (TOST), Utz Brands (UTZ), Warby Parker (WRBY), W&T Offshore (WTI), Wheaton Precious Metals (WPM)

Friday: Broadridge Financial (BR), Honest Compant (HNST), Spectrum Brands (SPB)

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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