The highly anticipated monthly inflation data in the United States could allow Wall Street to reach new highs. Barring any nasty surprises, of course… The S&P 500 ended last night at a 37th record since the start of the year, rising in each of the last seven sessions, its longest bull run since November. The Nasdaq also finished at its highest, once again driven by tech and AI-related stocks. Taiwan Semiconductor Manufacturing Co, the sole supplier of Nvidia and Apple’s most advanced chips, recorded its strongest second-quarter revenue growth since 2022.
Returning to inflation, the topic of the day, the consensus is for a second consecutive increase in core CPI of 0.2% sequentially. The broader index is expected to show a more modest increase of 0.1%, partly thanks to lower gasoline prices. Year-over-year, CPI is expected to increase 3.1% compared to 3.3% in May and core CPI 3.4%, the same as the previous month. Such an outcome would help solidify market expectations that the Fed would begin cutting rates at its September meeting.
“The June CPI report looks like another ‘very good’ report that should bolster the FOMC’s confidence in the path of inflation,” said Anna Wong of Bloomberg Economics. “This should set the stage for the Fed to begin cutting rates in September.” Rate swaps continue to reflect two rate cuts in 2024, while investors are now pricing in a quarter-point rate cut in September, according to the Fedwatch barometer.
Yesterday, Jerome Powell told the House Financial Affairs Committee that while he was not ready to declare the fight against inflation over, he believed the U.S. economy was headed for a soft landing, reiterating that “more good data” would allow the Bank to narrow its federal funds rate range. In his semiannual testimony to Congress, Powell also warned that keeping rates high for too long could weaken the economy, giving investors eager for rate cuts hope.
On the bond market, the US 10-year rate rose by 0.4 bp to 4.288% while the 2-year rate, more sensitive to monetary policy, rose by 1.3 bp to 4.633%.
The euro/dollar parity reaches $1.0839. A barrel of Brent is trading at $85.5. An ounce of gold is trading at $2,382 and Bitcoin is up 1% at $58,000.
Values
* Costco Wholesale. The discount warehouse retailer will raise its annual membership fees for the first time in seven years for its U.S. and Canadian customers, effective Sept. 1. Memberships at the retailer offer a range of incentives to customers, including free sample testing, discounts on food, gas, home insurance, travel and groceries, and a 2% annual reward on qualifying purchases made at its warehouses. The price of a basic membership will increase to $65 a year from $60. The move will affect about 52 million members. The company also said Wednesday that its U.S. comparable sales, excluding gasoline, rose 6.3% in June from a year earlier, compared with a consensus estimate of 5.8%.
