Stocks a week old: The worst of inflation may finally be over

This figure could change the count for the Fed, which is guaranteed to raise rates again at its next policy meeting on Sept. 21.

Traders may also earn an additional 3/4 percentage points, or 75 basis points, hike, three consecutive moves of that size.Fed Chairman Jerome Powell said last week “The Fed has a responsibility for price stability, and it accepts it. We need to act now.”

But if inflation data continues to suggest that “price stability” could finally be close to reality, would another big rate hike be less likely? CPI) figures will be released on Tuesday morning, while Producer Price Index (PPI) figures will be released on Wednesday.

Economists now expect consumer prices to fall slightly in August from July, with prices up 8.1% over the past 12 months. Of course, 8.1% is still incredibly high by historical standards, but it would be a notable slowdown from June’s 9.1% y/y jump.

“Inflation has probably peaked. Food and energy prices are falling. There is room to fall further,” said Joe Kalish, chief global macro strategist at Ned Davis Research. .

Investors seem reluctant to accept the possibility that the Fed will raise rates again by 75 basis points in the coming weeks, regardless of what the August inflation data show.

But traders hope September’s rate hike will be the last of such magnitude. Assuming the Federal Reserve raises interest rates by three-quarters of a percentage point on September 21st, interest rates will be in the target range of 3% to 3.25%.

Look at Federal Funds futures on the CME in November. As of noon on Friday, investors had priced in his odds of a half-point rate hike at his November 2 Fed meeting at 70%.

But there was only a 10% chance of four consecutive gains of 75 basis points. This may be one of the reasons why the stock has rebounded so much in September following the fall in August.

Slowdown in inflation and consumer spending to continue

Wall Street is clearly betting that inflation trends will continue to head in the right direction. Economists also expect producer prices, the cost of goods at wholesale prices, to fall slightly in August. Following a decline of 0.5% from June to July, he forecast a decline of 0.1% from July to August.

Producer prices rose 9.8% year-on-year in July, down from a June high of 11.3%. A further slowdown could be welcomed by markets, the Fed, and consumers.

That leads to retail sales. Consumer spending figures for August are due to be released on Thursday morning. The government last month reported that retail sales in July rose 10.3% year-on-year. It will be interesting to see if that sales rate picked up in his August or slowed down.

The Fed is in a tough spot. We want to dampen inflationary pressures, and the way to do that is by significantly raising interest rates. But the Fed wants to avoid a recession if possible. Landing on a ‘soft’ economy, as Powell said in May.
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Powell also talked about the causes of rate hikes and inflation “It hurts a little” for the economy in a speech at Jackson Hole last month. This could be a reason for the Federal Reserve to raise rates more modestly as long as inflation continues to fall.

And that’s the point. Investors need to pay more attention to inflation data, no matter what Powell or other Fed members say. Rate hike odds are always in flux as the Fed continues to rely on data.

“There must be a compelling downtrend in inflation.

Big tech at your fingertips

The economy won’t be the only focus next week. two software giants, Oracle (ORCL) When Adobe (Adobe)reports its latest earnings. Investors are watching for clues about the state of tech spending at big companies.

Shares of both companies have fallen this year, along with the rest of the tech sector and the broader market. Oracle is down nearly 15% and Adobe is down more than 30%.

However, analysts expect strong sales growth for both companies. Adobe is up nearly 15% from a year ago and Oracle is up nearly 20%.

One investment strategist said big tech companies such as Oracle and Adobe make sense for investors.

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“We have a much more mature and established big tech,” said Suzanne Hutchins, head of real return strategy and senior portfolio manager at Newton Investment Management.

Oracle and Adobe’s results also serve as a preview of the third-quarter tech revenue deluge to be announced later in October. These two solid results are microsoft (MSFTMore), SAP (SAP), IBM (IBM) and other cloud software companies.
However, recent earnings Salesforce (CRM)Daniel Morgan, senior portfolio manager at Synovus Trust Company, said it was cautious about its guidance. Oracle and Adobe could also be hit by a stronger dollar.

“Both companies generate more than 40% of their sales outside the United States,” Morgan said in the report.


Monday: Chinese market closed.Earnings from Oracle

Tuesday: US CPI; Starbucks (SBUX) investor’s day; twitter (TWTR) Shareholders vote to buy Elon Musk

Wednesday: US PPI

Thursday: US retail sales; US weekly unemployment claims; Meeting between Vladimir Putin of Russia and Xi Jinping of China.Earnings from Adobe

Friday: Consumer sentiment in Michigan, USA.China retail sales, unemployment and other economic data


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