Week Ahead on Wall Street: Inflation Report Card

What Goes Up, Must Come Down… Hopefully?

This week feels in some ways like the second week of April. Not only was the prior week’s jobs report pretty hot, but it beat every single economist’s official estimate. Next, we’re coming up on an inflation release this week. And if it goes like April’s went, discussions of no interest rate cuts from the Federal Reserve could begin anew.

But will it? The market certainly doesn’t think so: Economists project price gains of just 0.1% m/m and 3.4% y/y. That would be a cooler report than in April, where higher numbers were expected and delivered. While surprises are always possible — in either direction might I add — getting a similar print to April wouldn’t be just any regular surprise. It would be a huge surprise, one which would be rather unlikely to occur. But never say never.

Here’s why: Part of what’s driving the expected slowdown in inflation is that gas prices fell over 3% last month and have continued their trajectory lower, while other goods prices such as used cars are also drifting lower. More broadly, economists expect inflation in other goods and services to continue gradually slowing. That matters because energy costs are an important contributor to inflation, and if big ticket items get cheaper it takes pressure off consumers.

But there’s an added wrinkle this week that we didn’t deal with in April. The Federal Reserve will meet on the same day as the inflation report to decide on monetary policy actions (spoiler alert: they probably won’t change interest rates), as well as to give us an update on their economic projections. That surely adds some extra spice, as Fed Chair Jerome Powell will very likely be asked about the morning’s data in the afternoon press conference.

Volatility in the stock market, interest rate expectations, and more are all likely as investors digest this hectic week.

Economic and Earnings Calendar

Monday

•   May New York Fed Survey of Consumer Expectations: This is a measure of peoples’ expectations for inflation, jobs prospects, earnings growth, and more.

•   Earnings: Autodesk (ADSK)

Tuesday

•   May NFIB Small Business Optimism: This measures how small business owners feel about current and future economic conditions.

•   Earnings: Oracle (DAL)

Wednesday

•   May 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.

•   FOMC Interest Rate Decision: The Federal Reserve will announce any changes to monetary policy after the conclusion of its two-day FOMC meeting, in addition to providing commentary on the economy. It’s one of eight regularly scheduled meetings per year. Fed Chair Jerome Powell will hold a post-meeting press conference.

•   May Treasury Statement: This summarizes the federal government budget balance by tracking government revenues and expenditures.

•   Weekly Mortgage Applications: Mortgage activity gives insight on demand conditions in the housing market.

•   Earnings: Broadcom (AVGO)

Thursday

•   May 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 John Williams will moderate a discussion with Treasury Secretary Janet Yellen at an event hosted by the Economic Club of New York.

•   Earnings: Adobe (ADBE)

Friday

•   June University of Michigan Consumer Sentiment: How consumers feel about economic conditions affect their spending habits. This survey places a particular focus on inflation and its trajectory.

•   Fedspeak: Chicago Fed President Austan Goolsbee will participate in a fireside chat and Q&A at the Iowa Farm Bureau Economic Summit. Fed Governor Lisa Cook will give a speech on lessons from the American Economic Association Summer program.

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