Inflation slowed in July, Fed hints at potential rate cut in September

From Nasdaq: 2024-08-01 16:05:20

Headline inflation decelerated as the labor market cooled in July. The Fed has confidence that inflation is moving sustainably toward 2%, and Powell suggests a rate cut at the September meeting could be on the table. Value outperformed growth with the Russell 1000 Value Index up 5.8% and the Russell 1000 Growth Index down 1.5%.

Investors saw a rotational shift in equity price action from mega-tech to small-cap stocks, driven by expectations of interest rate cuts stimulating economic growth. Funds flowed out of mega-cap names, leading to a performance boost for the Russell Microcap Index. The Federal Open Markets Committee hinted at a rate cut in September.

With nearly 60% of S&P 500 companies reporting Q2 earnings, there have been positive surprises averaging 4% above consensus. The U.S. labor market shows signs of cooling, while headline inflation and core CPI decelerated in June. June retail sales were solid, and initial jobless claims remain stable.

Treasury yields have trended downward on softening economic data, with expectations of rate cuts. Oil futures dropped 4.5% in July, despite tensions in the Middle East. The DXY weakened by 1.7%, and the average cost of a gallon of regular gas is $3.49 in the U.S.

Looking ahead to August, investors will focus on Fed speak, economic data releases, and Q2 earnings. Key reports include the July Jobs report, PPI, CPI, and Retail Sales data. The Jackson Hole Economic Symposium will discuss the effectiveness of monetary policy.



Read more at Nasdaq:: July 2024 Review and Outlook