Week of 07/08-07/12 S&P500 Reaches New Highs, CPI Below Expectations

The stock market rebounded on Friday after a sharp tech selloff as investors digest the recent CPI (Consumer Price Index) report data and major banks earnings reports. Optimism over the next rate cut is higher than ever as June's CPI report came in below expectations, which paves the way for the FED to consider lowering interest rates as soon as September. Now the debate has shifted from whether the Fed will act to how often and how deep, with expectations for rates to drop by as much as 0.75% by the end of the year. Tech stocks fell sharply on Thursday as investors rotated out of the tech sector following the cooler than expected CPI and invest in interest rate sensitive stocks. Tesla stock, which has been rallying over 40% in the last month, retraced over 15% on Thursday on news of their robo-taxi launch being delayed until October. As far as the upcoming week, Jerome Powell will be speaking on Monday and the initial jobless claims report will be released on Thursday.

Why is the CPI report important to the FED?

The Consumer Price Index (CPI) report is crucial to the Federal Reserve as it provides valuable insights into inflation trends, allowing the Fed to gauge the purchasing power of consumers and make informed decisions regarding monetary policy. By monitoring changes in the CPI, the Federal Reserve can assess the impact of inflation on the economy and adjust interest rates as needed to maintain stability.