Investors on Wall Street are bracing for two important inflation reports this week. These reports would not require any extra funding, but could provide critical transparency into the health of our economy. Friday’s jobs report will presumably give the August producer price index (PPI) report some context, since it hits Wednesday morning. Then, the consumer price index (CPI) will come out on Thursday. These reports will go a long way in helping to set clear investor expectations about future economic conditions and Federal Reserve policy.
This week’s anticipation follows weaker-than-expected hiring data released on Friday, which raised speculations about the possibility of a half-point rate cut by the Federal Reserve. With a policy meeting scheduled later this month, market participants are keenly observing economic indicators that could influence the central bank’s decisions regarding benchmark interest rates.
As of this morning, futures tied to the Dow Jones Industrial Average are down 18 points. That’s a drop of 0.04%. The downside ussurpsition as the Dow — made up of 30 blue chip shares — is still 0.8% away from its final report. Likewise, the S&P 500 and the Nasdaq Composite are each 0.8% shy of their latest peaks.
Tom Hulick, CEO, Strategy Asset Managers, on what is happening in the labor market today.
“Although we cannot be certain, it is possible that the job market is much weaker than the Federal Reserve is aware of or willing to acknowledge.” – Tom Hulick, CEO of Strategy Asset Managers
Investor optimism following a surprisingly lackluster August jobs report has led to a rising market. They expect that given these economic indicators the Federal Reserve will be more likely to lower interest rates. Coming into the week, analysts are looking at a good opportunity for short-end Treasury yields to fall. They are particularly looking for the two-year yield to drop should revisions to economic data continue to go in a negative direction.