Stocks Closed Lower Yesterday, All Eyes On This Morning's CPI Inflation Report Image: Bigstock Stocks closed lower yesterday ahead of this morning's inflation data. This morning we'll get the Consumer Price Index (CPI) retail inflation report. For months the CPI has been coming down. Today, however, the report is calling for an increase in the headline number at 3.3% y/y vs. last month's 3.0%, while the core rate (ex-food & energy), is expected to come in at 4.8%, in line with last month's pace of the same. Both the headline and core numbers are down from last year's summer peak of 9.1% and 6.6% respectively. That report comes out at 8:30 AM ET. Once that's done, we'll get another inflation report tomorrow – the Producer Price Index (PPI) wholesale inflation report. That too has been going down for months. But every month's numbers are important as things can change. This week's inflation reports, and next month's inflation reports carry with it extra importance since the Fed has said their decision on whether they raise rates or not will be dependent on the data. They had previously hinted that they could raise rates to 5.6% (something they suggested at their June meeting). Since then, they raised by a quarter point in July, bringing the Fed Funds rate to 5.38%. Another 25 basis points in September would put rates at that 5.6% level. However, if inflation can show it's continuing to decline, that would go toward the notion that maybe the Fed can pause in September and possibly call it quits altogether. But if inflation starts creeping back up, or doesn't fall enough, that could bode for another increase. So every inflation report from here on out will be scrutinized as it could have an impact on what the Fed does at their next meeting on September 19-20. In other news, yesterday's MBA Mortgage Applications fell by -3.1% w/w with purchases down by -2.7%, and refi's down by -4.0%. In addition to today's CPI report, we'll also get Weekly Jobless Claims. And more earnings with 519 companies on deck to report, including Alibaba before the open. But the main event will be today's inflation report. Could be a busy day. See you tomorrow, Kevin Matras Executive Vice President, Zacks Investment Research |
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