Stocks Closed Lower, But Off Session Lows, Market Awaits Inflation Reports Later This Week Image: Bigstock Stocks closed lower yesterday, but well off their session lows. Moody's downgrade on Monday evening of almost a dozen smaller banks weighed on stocks yesterday. And positive EPS surprises before the open from Eli Lilly, UPS and Zoetis were not enough to offset that. (Although, LLY gained 14.87% on the day, while ZTS added 4.77%.) Yesterday's NFIB Small Business Optimism Index rose to 91.9 vs. last month's 91.0 and views for 91.5. The International Trade in Goods and Services report showed our trade deficit coming in at -$65.5 billion, just missing the consensus for -$65.4B, but narrowing from last month's -$68.3B. And Wholesale Inventories slipped -0.5% m/m vs. last month's downwardly revised -0.4% and views for -0.3%. Today we'll get MBA Mortgage Applications and the EIA Petroleum Status Report. We'll also get more earnings with another 443 companies on deck today, including Disney, Novo Nordisk and Illumina to name a few. But what everybody is really waiting for are Thursday's and Friday's inflation reports. On Thursday we'll get the Consumer Price Index (CPI) (retail inflation), and on Friday we'll get the Produce Price Index (PPI) (wholesale inflation). For month's the CPI has been coming down. Same for the PPI. The core rate (ex-food & energy) for CPI came in at 4.8% last month, down from last year's summer peak of 6.6%. Same with the PPI as they recently came in at 2.8% vs. last year's peak of 8.2%. But the Fed, while acknowledging that inflation has eased, continues to note that it still remains too high. While they have previously said they can see another hike in interest rates, they have also said they will be data dependent. So all eyes will be on this week's inflation reports. For tomorrow's CPI, the consensus is actually calling for an increase in the headline number at 3.3% y/y vs. last month's pace of 3.0%, while the core rate is expected to come in at 4.8%, in line with last month's pace. Granted, after this week, we'll still get 1 more CPI inflation report, 1 more PPI inflation report, 1 more PCE inflation report, and 1 more employment report before the next FOMC meeting on September 19-20. But every report counts. And could help shape the Fed's decision on rates next month. See you tomorrow, Kevin Matras Executive Vice President, Zacks Investment Research |
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