Economic Beat: Investors were encouraged by further evidence of peak inflation

Hello, this is Claire Ellerhorst, Senior Portfolio Manager at Fifth Third Bank with this week’s Economic Beat.

Major U.S. equity indices rose in the holiday-shortened trading week, snapping a three-week losing streak. The benchmark S&P 500 Index rose 3.7% in total return for the week, while the blue-chip Dow Jones Industrial Average added 2.7% and the tech-heavy Nasdaq Composite surged 4.2%. Treasury yields rose, and the U.S. dollar fell versus major peers. West Texas Intermediate (WTI) crude was modestly lower for the week, while gold finished higher.

While last week’s market action may prove to be a bear market bounce, investors were encouraged by further evidence of peak inflation and solid labor market data, supporting hopes for a soft landing. Federal Reserve officials continued their recent hawkish commentary and expectations firmed for a 75-basis point rate hike at the September policy meeting.

The economic calendar was relatively light last week. The Institute for Supply Management’s Services index came in better than anticipated, indicating activity remains strong. Weekly jobless claims unexpectedly fell, adding to optimism after the August employment situation report showed signs of strength in the labor market.

In the week ahead, the economic calendar includes small business confidence, retail sales and industrial production. Arguably the most closely watched report of the week will be the August consumer price index (CPI) release, an important inflation indicator and the last key data release ahead of the September Federal Open Market Committee meeting. Market participants and economists will be eager to see if the numbers reaffirm the peak-inflation narrative. The CPI data will be key in the Federal Reserve’s decision on the path for interest rates ahead.

As always, we’ll be watching and reporting back to you. Thank you.