Week Ahead on Wall Street: Inflation Reaction
By: Mario Ismailanji · April 08, 2024 · Reading Time: 4 minutes
How Hot We Talkin’?
Last week’s jobs report was hot. That might even be an understatement, since the number of jobs added was higher than every single economist’s official forecast. After this upside surprise, the focus is shifting to inflation data this week. Might it come in similarly hot? Maybe. Let’s talk about it.
After relatively low readings in the second half of 2023, the Consumer Price Index came in higher than expected in both January and February. Investors are divided on whether the story changed in March: Some think the recent hot inflation data is associated with start-of-the-year seasonal adjustment quirks, and is mostly transitory *cough* temporary. Meanwhile, others think that it’s a sign of an acceleration in inflation. There is evidence for both arguments, so we’ll have to wait to see who’s right.
In terms of this week’s data, consensus estimates are for CPI to come in at 0.3% m/m and 3.5% y/y. The monthly change would be the third print in a row above the Fed’s 2% inflation target, while the year-over-year pace would be the fastest since September.
But if the consensus expectation is right, the question evolves to how the Fed will react. While we weren’t able to hear from Fed officials following last month’s CPI due to the communications blackout period ahead of the FOMC meeting, we don’t have any such issue this time and we’ll get both inflation numbers and Fedspeak. With some officials highlighting the possibility of not cutting interest rates at all this year if inflation plateaus at a higher level, their reactions will be key.
Economic and Earnings Calendar
Monday
• March New York Fed Survey of Consumer Expectations: This is a measure of peoples’ expectations for inflation, jobs prospects, earnings growth, and more.
• Fedspeak: Minneapolis Fed President Neel Kashkari will take part in a town hall.
Tuesday
• March NFIB Small Business Optimism: This measures how small business owners feel about current and future economic conditions.
• Earnings: Delta Air Lines (DAL)
Wednesday
• March Consumer Price Index: The CPI is one of the most popular indicators for tracking consumer price trends and is a marquee release for market watchers. CPI has come down notably from its peak in 2022 but remains somewhat above pre-pandemic levels.
• March 19-20 FOMC Meeting Minutes: The Federal Reserve releases detailed notes of every FOMC meeting three weeks after their conclusion. Investors often look for more information on Fed officials’ views for hints on the outlook for interest rates and the economy.
• February Wholesale Inventories and Sales: Wholesalers often operate as an intermediary between manufacturers and retailers, serving as a key part of the goods supply chain.
• Weekly Mortgage Applications: Mortgage activity gives insight on demand conditions in the housing market.
• Fedspeak: Fed Governor Michelle Bowman will discuss Basel capital requirements. Chicago Fed President Austan Goolsbee will participate in a panel discussion.
Thursday
• February Producer Price Index: The PPI tracks price trends that producers face and is down significantly from its peak earlier in the cycle.
• Weekly Jobless Claims: This high frequency labor market data gives insight into filings for unemployment benefits. Jobless claims have continued to show a labor market that remains strong despite having cooled.
• Fedspeak: New York Fed President will give a keynote speech at Federal Home Loan Bank of New York 2024 Member Symposium. Boston Fed President Susan Collins will speak at the Economic Club of New York. Atlanta Fed President Raphael Bostic will take part in a moderated conversion on financial services leadership.
• Earnings: Fastenal (FAST), CarMax (KMX), Constellation Brands (STZ)
Friday
• April University of Michigan Consumer Sentiment: How consumers feel about economic conditions may affect their spending habits. This survey places a particular focus on inflation and its trajectory.
• Fedspeak: Atlanta Fed President Raphael Bostic will give a speech and take part in a moderated conversation on housing. San Francisco Fed President Mary Daly will take part in a fireside chat at a fintech conference.
• Earnings: BlackRock (BLK), Citigroup (C), JPMorgan Chase (JPM), Progressive (PGR), State Street (STT), Wells Fargo (WFC)
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