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👋 Good morning! It's CPI day. |
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| What we're watching | | 🏷️ The big inflation reveal: June's inflation print Thursday is the biggest event on our calendars this week, with results set to cross at 8:30 a.m. ET. Economists expect the Consumer Price Index's core reading, which strips out volatile energy and food, to show price increases of 0.2% since May, keeping the year-over-year figure at 3.4%. Adding those components back in, the headline figure is set to come in at 3.1%, which would be the lowest annual figure since January.
💼 Powell looking at jobs: In his appearance before House lawmakers on Wednesday, Federal Reserve Chair Jerome Powell reiterated the central bank's increased attention toward the labor market after recent data indicated the labor market is cooling off. After spending most of the year guarding against labor data that might boost inflation, the shifting tone has quickly reverberated through markets, which welcomed the dovish remarks. Still, Powell's words were far from sounding an alarm, as he said the labor market "is getting pretty much in balance to where it needs to be."
📈 37th high of 2024: The S&P 500 closed Wednesday up 1%, bringing it to 5,634 — the 37th record high close of 2024 — and the seventh straight close in the green for the flagship index. The index has benefited of late from a potent cocktail of AI, Tesla, and rate-cut hopes as a few of the year's major narratives come together. Just in time for earnings season to begin in earnest.
✈️ Earnings season takes off: Delta Air Lines reports Thursday, headlining the first day of major corporate results of the quarter. PepsiCo and Conagra Brands also join in before the big banks grab the microphone Friday morning.
🤖 AI's bulls and bears: There's plenty of bullishness left in the AI trade, according to BlackRock. Wei Li, its global investment strategist, said this week that AI's capital expenditure numbers will be roughly in line with the Industrial Revolution and that the next year will see Big Tech stock prices soar, even if there isn't much to show for it yet. The bullish call sits opposite Goldman Sachs' recent note — titled "Gen AI: too much spend, too little benefit?" |
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| Politics may be volatile this year, but markets aren't | | Today's Takeaway is by Julie Hyman, Anchor.
Washington has been abuzz with questions about whether Joe Biden should step aside as presidential candidate ever since his poor debate performance a couple of weeks ago.
But while political TV networks and newspaper editorial pages have been hotly discussing the issue, equity markets barely shrugged. That's not an unusual reaction, but it remains somewhat puzzling given that this is an unusual election on a number of fronts.
The S&P 500 has risen by about 2% since President Biden's much-criticized debate showing on June 27. What's more, the VIX index — which measures volatility and serves as a sort of barometer of the stock market's mood — has barely budged.
In fact, if you take July 9 as a midway point of this election year — as Bespoke Investment Group did in a recent analysis — you'll see that the VIX reading was the lowest for a presidential election year going back to 1992. (Catch Bespoke's Paul Hickey on Yahoo Finance Live Thursday in the 4pm hour.) |
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|  | | There are several potential reasons why stocks have shrugged as the political class has chattered.
One: Are investors seeing the race as a win-win? If Biden stays in the race and is reelected, that could mean the status quo continues in a year that has seen 37 record closes for the S&P 500 as of Wednesday's close. If Donald Trump prevails, his presidency could be marked by a decrease in regulation — something some CEOs would welcome.
Of course, when Trump won the presidency the first time around, stock markets plunged only to recover and rally. It's difficult for investors to accurately predict the actual effects of a president on the economy and markets. (And as our Rick Newman has written, the economic power of the presidency is frequently overstated in any case.)
Two: All the chattering won't make a difference in the race. Some political analyses have found that voter preferences didn't change after the debate.
Three: It might just come down to timing. The election is a long four months away. As Bespoke wrote in their note to clients, "While low now, though, there's a good chance that the VIX will move higher leading up to the election. Since 1990, the median maximum increase in the VIX during the four months following July 9th has been 8.9 points whereas in election years, the median increase over the following four months has been 13.1 points."
That means there's still plenty of time for election anxiety to make its way to stocks. |
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| Chart of the day | | The recent jobs data, inflation numbers, and dovish comments from Federal Reserve Chair Jerome Powell have helped the market surge to yet another all-time high.
But a look at Big Tech reminds us exactly why the S&P 500 is having a moment — again. |
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 | | After spending most of the year left out of the AI trade, Apple crossed into the green in May. And finally, last week Tesla joined the rest of its "Magnificent" cohort, sharply jumping into positive territory.
Of course, Nvidia's presence here means grading on a curve, as the entire scale of this chart is ruined by Nvidia's 179% gain year to date, which makes Meta's 54% second place look unimpressive. |
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| Earnings and economic calendar | | Thursday
- Economic data: Consumer Price Index, month-over-month, June (+0.1% expected, +0% previously); CPI excluding food and energy, month-over-month, June (+0.2% expected, +0.2% previously); Consumer Price Index, year-over-year, June (+3.1% expected, +3.3% previously); CPI excluding food and energy, year-over-year, June (+3.4% expected, +3.4% previously); Real Average Hourly Earnings, year-over-year, June (+0.7% previously); Real Average Weekly Earnings, year-over-year, June (+0.5% previously); Initial jobless claims, week ended July 6 (238,000 previously)
- Earnings: Conagra Brands (CAG), Delta Air Lines (DAL), PepsiCo (PEP), Progressive (PGR)
Friday
- Economic data: Producer Price Index, month-over-month, June (+0.1% expected, -0.2% previously); PPI, year-over-year, June (+2.2% previously); Core PPI, month-over-month, June (+0.1% expected, 0% previously); Core PPI, year-over-year, June (+2.3% previously); University of Michigan consumer sentiment, July preliminary (67 expected, 68.2 previously)
- Earnings: BNY Mellon (BK), JPMorgan (JPM), Citigroup (C), Wells Fargo (WFC)
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