NASDAQ 100, Dow Jones, S&P 500: Cautious Trade Ahead of US Inflation Data

Highlights

• Mixed performance in US stock indexes amid anticipation of inflation data.
• Federal Reserve officials’ comments highlight potential for additional rate hikes and the end of the tightening cycle.
• Upcoming CPI and PPI reports to provide insights into inflation trends and future interest rate decisions.

Overview

The major U.S. stock indexes are putting in a mixed but mostly better performance on Tuesday, following a three-day decline, as traders await key inflation data scheduled for release later in the week. Investors are also digesting comments from several Federal Reserve officials who indicated that additional rate hikes may be warranted due to inflation levels but also suggested that the central bank is nearing the end of its current tightening cycle.

At 14:00 GMT, the blue chip Dow Jones Industrial Average is at 34050.90, up 106.50 or +0.31%. The benchmark S&P 500 Index is at 4416.06, up 6.53 or +0.15% and the tech-weighted Nasdaq Composite is trading 13682.69, down 2.79 or -0.02%.

In yesterday’s session, the Dow Jones Industrial Average gained 209.52 points, or 0.62%, while the S&P 500 advanced 0.24%. However, the Nasdaq Composite lagged, rising only 0.18%.

Traders Eyeing US June CPI Report

The upcoming release of the June consumer price index (CPI) report on Wednesday and the June producer price index (PPI) on Thursday will provide insights into whether the decline in inflation has continued and set the stage for future interest rate decisions. Economists polled by Reuters expect the consumer price index to have risen by 3.1% in June, a decrease from May’s 4% increase. However, the core rate, which excludes volatile items, is still expected to remain elevated at 5%, well above the Federal Reserve’s 2% target.

Quarter-Point Rate Increase Expected

Market participants have priced in another quarter-point rate increase at the Federal Reserve’s July 25-26 meeting. However, there is uncertainty about the central bank’s actions at its September meeting, as robust jobs data from last week has raised concerns that policymakers may resume rate hikes after the pause in June.

The pause in rate hikes is seen as a strategy to gather more information. Ultimately, the timing of when the central bank begins to cut rates on the other side of this cycle is considered more consequential for the risk landscape.

Stocks on the Move:  Mixed Performance

In today’s market, JetBlue Airways saw a decline in its stock following a downgrade by Evercore ISI to underweight, citing balance sheet concerns. On the other hand, shares of Amazon edged higher as the company launched its two-day Prime Day summer sale, and Wells Fargo added Amazon to its Signature Picks list, citing positive expectations for Amazon Web Services and Prime Day revenue growth. 3M also experienced a rise after being upgraded by Bank of America to neutral from underperform, with positive catalysts expected related to litigation settlements and restructuring.

Etsy, Salesforce Climb

Furthermore, Etsy jumped 7.2%, making it the best-performing stock in the broad market index, while software company Salesforce’s shares gained 3.8% during premarket trading, following the announcement of price increases across its cloud-based offerings.

Ready to Kickoff Q2 Earnings Season

Looking ahead, the market is gearing up for the second-quarter earnings season, with key companies such as JPMorgan Chase, Wells Fargo, Citigroup, BlackRock, PepsiCo, Delta Air, and UnitedHealth set to report their results later this week.

Short-Term Forecast:  Investors Seeking Guidance

In summary, U.S. stock indexes are showing a mixed performance as traders await inflation data. Federal Reserve officials’ comments suggest a balancing act between additional rate hikes and the end of the current tightening cycle. The upcoming CPI and PPI reports will provide important insights. Meanwhile, various stocks are making moves, with some downgrades and upgrades, as well as price increases announced by companies like Amazon and Salesforce. Investors are also anticipating the start of the second-quarter earnings season.