Stocks ended the holiday-shortened week with strong gains. The S&P 500 (SPX), the Nasdaq Composite (NDAQ), and the Nasdaq-100 (NDX) recorded new highs on Friday, while the Dow Jones Industrial Average (DJIA) notched a solid weekly gain, though still trading about 1.5% lower than the record high it reached in May.
Stocks were boosted higher on Friday after June’s job market report supported a “Goldilocks economy” thesis. The string of monthly gains north of 200,000 positions continued in June, but outside of still-strong job creation, the numbers signaled that the labor market is quickly cooling off. The U.S. unemployment rate unexpectedly rose to 4.1%, its highest level since November 2021, while wage growth slowed to a three-year low. In addition, May’s hiring numbers were revised significantly lower.
The signs of the weakening job market with easing wage pressures have strongly increased investor bets on a September rate cut, as they added to signs of the disinflation trend seen in the previous months’ PCE and CPI reports. Still, Wall Street analysts warn against overly optimistic easing bets, as the job market has just begun to loosen up and remains very tight. On the other hand, the latest economic data has been consistent with the Federal Reserve’s view of steadily declining inflation in a gently cooling economy.
This week, investors will be closely following the June CPI report, slated to be published on Thursday, as well as Jerome Powell’s testimony before Congress this Tuesday, which may shed more light on the central bank’s assessment of the economy and its policy outlook change.
Three Economic Events
Here are three economic events that could affect your portfolio this week. For a full listing of additional economic events, check out the TipRanks Economic Calendar.
» June’s CPI and CPI ex. Food and Energy (Core CPI) – Thursday, 06/11 – The CPI report is one of the two key indicators used to measure inflation (the second one is the Personal Consumption Expenditures, or PCE). Policymakers, businesses, and consumers closely watch the CPI report, as it reflects the price trends in the economy, shapes consumer spending and business outlooks, and directly affects the Federal Reserve’s policy rate decisions.
» June’s Producer Price Index (PPI) – Friday, 07/12 – This report reflects input prices for producers and manufacturers. Since PPI measures the costs of producing consumer goods – directly affecting retail pricing – PPI is seen as a good pre-indicator of inflationary pressures. This makes it a leading indicator for the following month’s CPI. Thus, the PPI directly impacts the overall inflation outlook among policymakers.
» June’s Michigan Consumer Sentiment Index and UoM 5-year Consumer Inflation Expectations (preliminary readings) – Friday, 07/12 – These reports portray the results of a monthly survey of consumer confidence levels and consumers’ views of long-term inflation in the United States. The level of confidence affects consumer spending, which contributes about 70% of the U.S. GDP. The inflation expectations index is used as a component of the Fed’s Index of Inflation Expectations calculations.
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