The market moves forward amid mixed economic data
Summary
While last week's economic data presented a mixed picture, the expectation is a 25 basis point Fed cut in September. Inflation and producer prices rose, retail sales were steady, and consumer sentiment declined. Key upcoming events include the Fed’s Jackson Hole symposium, with major central bank leaders scheduled to speak.
The S&P 500 hit another all-time high on Thursday and gained 0.99% over the week, which brings the YTD return to over 10%. The 10-year Treasury yield edged up 6 bps to close at 4.33% on Friday.
Inflation
Although recent data indicates higher inflation figures (see below), the Federal Reserve is still expected to proceed with a rate cut in September. Projections for the remainder of the year are now two rate cuts, compared to three expected last week. Forecasts regarding rate changes may fluctuate in response to new data, with attention focused on the upcoming Jackson Hole meetings, PCE inflation data scheduled for release on August 29 and August jobs data due on September 5.
July CPI released last Tuesday mostly met expectations, with headline CPI rising 0.2% in July and year-over-year holding steady at 2.7% (vs. 2.8% expected). Core CPI, excluding food and energy, rose 0.3% in July (meeting consensus expectations) and 3.1% year-over-year, slightly higher than 3.0% expected.
July PPI released last Thursday showed a hotter-than-expected increase rising 0.9%, significantly higher than the 0.2% expectation. Core PPI month-over-month also came in at 0.9%, exceeding the 0.2% consensus. On a year-over-year basis, PPI was up 3.3% and core PPI up 3.7%, indicating accelerating inflation at the producer level.
Import prices, released last Friday, rose 0.4% month-over-month, ahead of expectations and the highest in 15 months, while export prices rose 0.1%.
U.S. Treasuries
U.S. Treasuries indicate yields for on-the-run U.S. Treasury bills, notes, and bonds, which are typically the most recently auctioned and most liquid issue with a maturity closest to the stated tenor. These are commonly used for pricing fixed-rate debt at origination and for calculating yield maintenance.
|
Loading rates... |
EURIBOR
EURIBOR is an interbank lending rate that is averaged from reports by a panel of banks seeking unsecured Euro-denominated loans in the short-term money market. The EURIBOR index is the adjustable interest rate referenced on approximately EUR 150 trillion of debt and derivatives.
|
Loading rates... |
Other key data
Retail sales for July increased by 0.5% month-over-month, matching expectations and signaling steady consumer spending. Industrial production declined by 0.1%, while capacity utilization stood at 77.5%. Preliminary Michigan consumer sentiment for August dropped to 58.6 from 61.7 in July; inflation expectations rose to 4.9% for one year and 3.9% for five years. Initial jobless claims for the week ending August 9 were 224,000, with continuing claims for the week ending August 2 at 1.95 million — both slightly lower than the previous report. The NY Empire State Manufacturing Index improved to 11.90 from 5.50, beating the consensus of 0.
Progress toward peace in Ukraine?
As the Washington D.C. Attorney General pursued legal action against President Trump over the local police department takeover, President Trump held a high-stakes meeting with Russian President Vladimir Putin in Alaska on Friday to explore possibilities for ending the war in Ukraine. President Trump emphasized that there would be "severe consequences" should a ceasefire not be achieved, yet he expressed optimism about the prospects for a deal. Ukrainian President Zelensky, meanwhile, stated he is "counting on American strength." Should the summit yield positive outcomes, it could pave the way for further negotiations with Zelensky, potentially bringing an end to over three years of conflict.
The week ahead
Economists will meet in Jackson Hole this week for the Federal Reserve’s annual symposium. Chair Powell speaks Friday at 10:00 a.m. EDT. ECB President Lagarde and BoE Governor Bailey join the Saturday panel at 12:25 p.m. EDT.
Disclaimers
Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit chathamfinancial.com/legal-notices.
25-0074
