Stocks Hold Near Record Before Key Inflation Data: Markets Wrap

Wall Street traders bracing for key inflation data left stocks wavering near all-time highs, with bonds and the dollar edging up. Bitcoin pared a rally that earlier drove it above $122,000.

With the earnings season almost done, investors are shifting gears to the economic picture, looking for clues on whether the Federal Reserve will be able to resume its rate cuts in September. Following an almost 30% surge from its April lows, the S&P 500 hovered near 6,400.

The yield on 10-year Treasuries declined one basis point to 4.27%. The Bloomberg Dollar Spot Index rose 0.2%.

Data due Tuesday is forecast to show US consumers saw a slight pickup in inflation as retailers gradually raised prices on a variety of items subject to higher import duties.

The core consumer price index, regarded as a measure of underlying inflation because it strips out volatile food and energy costs, rose 0.3% in July, according to the median projection in a Bloomberg survey of economists.

“The market’s reaction to any surprises in the numbers could be exaggerated — especially if a significantly hotter-than-expected CPI print leads traders to believe the Fed may not cut rates at its next meeting,” said Chris Larkin at E*Trade from Morgan Stanley.

“There is no doubt about it, CPI, will not be good tomorrow,” said Andrew Brenner at NatAlliance Securities. “The bigger question is ‘does it matter?’ We think not. Inflation will remain sticky, with potholes, but a weakening employment situation will commandeer the Fed outlook.”

There’s a 70% chance of further gains in the S&P 500 following Tuesday’s inflation report, according to the JPMorgan Chase & Co. Market Intelligence team led by Andrew Tyler.

They predict the S&P 500 will advance as much as 2% if the data is either in-line or cooler than estimated. A hot report could spark declines of nearly 3%.

Meantime, strategists at Citigroup Inc. raised their year-end target for the S&P 500 to 6,600 points from 6,300. Companies have produced “an impressive beat,” while also mostly sticking with their projections for the second-half of the year, the team led by Scott Chronert said.

US companies struck a more positive tone last week on post-earnings conference calls, although there’s still uncertainty around consumer demand and capex, according to RBC Capital Markets strategists led by Lori Calvasina.

A record share of fund managers see US stocks as too expensive after the sharp rally since April lows, according to a monthly survey by Bank of America Corp. About 91% of participants indicated that US stocks are overvalued, the highest ever proportion in data going back to 2001.

Corporate Highlights:

Nvidia Corp. and Advanced Micro Devices Inc. agreed to pay 15% of their revenues from Chinese AI chip sales to the US government in a deal to secure export licenses, an unusual arrangement that may unnerve both US companies and Beijing.
Micron Technology Inc. raised its fiscal fourth-quarter revenue and earnings outlook, citing “improved pricing” for a key product.
C3.ai Inc. tumbled 30% after a steep sales miss the software company attributed to its founder’s health issues.
Paramount has acquired the exclusive rights to show all events from the Ultimate Fighting Championship in the US over the next seven years, the companies announced Monday, a $7.7 billion deal designed to boost the Paramount+ streaming service.
Rumble Inc., the online video network platform, announced its intent to buy AI firm Northern Data.
Denmark’s plan to inject billions of dollars into Orsted A/S has sparked political backlash at a time when taxpayers are already spending more on defense and the fiscal bonanza from drug giant Novo Nordisk A/S is fading.
Lithium prices and stocks spiked after battery giant Contemporary Amperex Technology Co. Ltd. halted operations at a major mine in China, spurring speculation that Beijing might move to suspend other projects as it tackles overcapacity across the economy.
Barrick Mining Corp. posted a net charge of $1.04 billion related to the seizure of its vast Loulo-Gounkoto gold complex by Mali’s military junta.

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