New York Stock Market Rises Awaiting June CPI and Earnings Announcements

CPI Data Released on 11th, PPI on 12th
Key to Continued Inflation Slowdown Amid Employment Cooling Signals
Powell to Testify Before Congress with Semiannual Monetary Policy Report
Earnings Season for Q2 Begins with Citi and JP Morgan

The three major indices of the U.S. New York stock market are rising in early trading on the 8th (local time). Investors are adopting a wait-and-see stance ahead of the release of the June Consumer Price Index (CPI) on the 11th and the second-quarter earnings announcements of major companies. If the recent signs of cooling in the labor market are followed by a continued slowdown in the CPI, the possibility of a rate cut in September is expected to gain more weight.

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As of 10 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average is trading at 39,611.65, up 0.6% from the previous session. The S&P 500, which focuses on large-cap stocks, is up 0.17% at 5,576.76, and the tech-heavy Nasdaq index is up 0.06% at 18,363.54.

By stock, Mopic Holdings is soaring 74.7%. Buying surged on news that U.S. pharmaceutical company Eli Lilly is acquiring Mopic Holdings for $3.2 billion. Paramount Global's Class A shares are up 4.89% on news that it will be acquired and merged by Hollywood production company Skydance. Skydance plans to first acquire Paramount Global's parent company, National Amusements, for $2.4 billion in cash, then inject additional capital to merge with Paramount Global and establish a new corporation. SolarEdge, a solar inverter solutions company, jumped 10.58% after Bank of America (BoA) upgraded its investment rating from 'underperform' to 'neutral.'

This week, market attention is focused on the June CPI to be released on the 11th. Last month's CPI is expected to rise 3.1% year-on-year, below the May increase of 3.3%. The CPI growth rates for April and May (3.4% and 3.3%, respectively) both fell short of the previous months' figures (3.5% and 3.4%), raising the question of whether the CPI slowdown trend has continued for three consecutive months. In particular, attention is on whether the housing cost component, which rarely slows down, has eased. The core CPI, excluding volatile food and energy prices, is expected to rise 3.4% in June, the same level as May's increase (3.4%).

The Producer Price Index (PPI) for June will be released on the 12th, one day after the CPI. The wholesale price index, PPI, influences the retail price index, CPI, over time. PPI is expected to rise 0.1% month-on-month in June, exceeding May's figure of -0.2%.

With recent signs of cooling in the U.S. labor market, if the June CPI data confirms the disinflation trend, expectations for a rate cut in September are likely to strengthen. The U.S. unemployment rate for June, released on the 5th, reached 4.1%, the highest in two years and six months. Nonfarm payrolls increased by 206,000, a decrease from the previous month's 218,000.

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In the market, expectations are rising that the Fed will begin cutting rates in September and reduce rates twice this year, given the forecast of slowing inflation and signs of cooling in the labor market. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market currently reflects a 77.1% chance that the Fed will cut rates by at least 0.25 percentage points at the September FOMC meeting, up from 65.6% a week ago. The probability of a rate cut of at least 0.25 percentage points in November has also risen from 78% a week ago to 86.7%.

Greg Willensky, U.S. head of fixed income at Janus Henderson Investors, said, "The upcoming inflation data is very important in determining the timing of the first rate cut," adding, "Signs of ongoing economic growth and labor market easing are likely to be positive for stocks and high-yield bonds, at least in the short term."

Fed Chair Jerome Powell is also scheduled to speak. Powell will appear before both the U.S. House and Senate on the 9th and 10th to report on monetary policy. Earlier, on the 2nd, Powell said, "We are returning to a disinflationary path," but added, "Before embarking on easing policies, we want greater confidence that inflation is sustainably moving toward the 2% target." He is likely to reaffirm this stance during his congressional appearances this week.

The second-quarter earnings season will also kick off in earnest this week, starting with financial stocks such as Citigroup and JPMorgan Chase. Quarterly earnings announcements from major companies like PepsiCo and Delta Air Lines will follow.

U.S. Treasury yields are rising slightly. The 10-year U.S. Treasury yield, a global benchmark for bond yields, is up 1 basis point (1 bp = 0.01 percentage points) from the previous trading day to 4.28%, while the 2-year Treasury yield, sensitive to monetary policy, has risen 2 basis points to 4.62%.

International oil prices are falling amid hopes for a ceasefire negotiation between Israel and the Palestinian militant group Hamas. West Texas Intermediate (WTI) crude oil is down $0.52 (0.63%) from the previous trading day to $82.64 per barrel, and Brent crude, the global benchmark, is down $0.42 (0.5%) to $86.12 per barrel.