Investors are bracing for next week's Consumer Price Index report, which markets say could decide whether the Federal Reserve raises interest rates at its September 15-16 meeting. Fed funds futures late Friday pointed to a 57% chance of a hike, while the S&P 500 sits about 1% below its mid-August record.
Inflation data takes center stage
The S&P 500 dropped Friday but still ended the week with a slim gain, leaving the index about 1% shy of its mid-August record high. Rate-path expectations and rising Treasury yields jostled equities through the week.
Bets on a hike ramped up after a late-August speech from Fed Chairman Kevin Warsh signaled the central bank might have to act if inflation remains high. The case built further on Friday after a strong labor market report, though the outcome remains uncertain.
That uncertainty now centers on the monthly Consumer Price Index report, due September 11, Wall Street's most closely watched inflation gauge. Barclays economists said in a note: "Attention now shifts to next week's inflation data."
Producer and consumer prices frame the week
Thursday's Producer Price Index report arrives a day ahead of the CPI data, during a holiday-shortened week with U.S. markets closed Monday for Labor Day. Economists polled by Reuters expect a 0.4% monthly rise in August CPI, and a 0.2% rise in the core measure, which excludes food and energy.
Inflation has run consistently above the Fed's 2% annual target for several years, but the prior month's CPI reading showed prices barely increased.
Hike odds swing on labor data
Odds of a rate hike fell Thursday after Fed Governor Christopher Waller said he is inclined to favor holding rates steady if data confirms cooling inflation. However, odds rose again Friday after data showed August employment grew by 162,000 jobs, nearly triple the forecast.
The benchmark 10-year Treasury yield edged up to 4.78% late Friday, moving toward the 5% level investors have flagged as troublesome for equities. Next week, the Treasury Department is set to start a larger buyback program for longer-dated debt, announced last month as an effort to tamp down rising yields.
Quarterly results from Oracle on Thursday could also carry weight for the market's AI trade, since the company is one of the hyperscalers spending heavily on AI data centers.
Source: Investing.com
Trading involves risk.
Risk Disclaimer
