Mid-Week Market Minute 08.10.22

Stocks rallied this week as investors digested the latest update on inflation. The Consumer Price Index (CPI) was unchanged during the month of July, against expectations for a 0.2% gain. Year-over-year, inflation increased by 8.5%, cooling from June’s 9.1% increase but still firmly above the Federal Reserve’s long-term target around 2%. Lower inflation data largely reflect lower energy prices. For example, the average price of a gallon of gas in the U.S. (AAA data) has fallen from an all-time high of $5.01 per gallon on June 14 to $4.01 today.

Optimistic that inflation has finally peaked, investors cheered Wednesday’s CPI release, pushing the S&P 500 higher by about 1.75%. Interest rates retreated as well, as softer inflation likely will take some pressure off the Federal Reserve to continue aggressively hiking interest rates. On the earnings front, Micron Technology (MU) warned of slowing demand amid macroeconomic uncertainty. NVIDIA Corp. (NVDA) reiterated this view in their pre-earnings announcement on Monday.

Looking forward to the remainder of the week, jobless claims will be reported on Thursday, where investors will be looking for claims to come in around 265,000. On Friday, we get the most recent gauge of consumer sentiment, where the markets are anticipating a boost in sentiment driven by lower inflation expectations.

Source: GSAM, CNBC, JPMorgan

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