Wall Street was poised for a higher open on Monday as indexes continued their recovery from losses early in the previous week. The S&P 500 and the Nasdaq Composite had rebounded by the end of last week after experiencing a significant drop, driven by concerns of recession and the unwinding of currency carry trade positions involving the yen. Investors are closely watching for a deluge of data, including the U.S. consumer prices report, to be released on Wednesday. The CPI reading is anticipated to show an acceleration of headline inflation by 0.2% in July on a monthly basis, while remaining steady at 3% on a year-over-year basis.
The market is divided on expectations for U.S. interest rates, with money markets evenly split between a 50- and 25-basis-point cut in September, leading to a total easing of 100 basis points by the end of 2024. July’s U.S. retail sales figures set to be released later in the week are expected to show slight growth, with any weakness in the data potentially reigniting fears of a consumer slowdown and a looming recession. Earnings reports from major companies like Walmart and Home Depot will also provide important insights into consumer spending trends in the U.S., the world’s largest economy.
Keith Buchanan, a senior portfolio manager at GLOBALT Investments, cautioned that if inflationary data proves to be more persistent, it could lead to assumptions that may require the market to adjust expectations of an aggressive Fed response, potentially increasing volatility. Fed Governor Michelle Bowman, in a slight departure from her usual hawkish stance, acknowledged some welcome progress on inflation in recent months, although she noted that inflation remains uncomfortably above the central bank’s 2% goal and is prone to upside risks. Despite these uncertainties, the CBOE Volatility Index, Wall Street’s fear gauge, was slightly higher but significantly lower than its peak a week earlier, indicating a certain level of stability in the market.
In premarket trading, most megacap and growth stocks were on the rise, with companies like Nvidia, Amazon.com, and Starbucks among the top gainers. Starbucks saw a 2.5% increase following reports that activist investor Starboard Value, a stakeholder in the coffee chain, is pushing for measures to boost the company’s stock price. Robinhood Markets also saw a 1.9% increase after receiving an upgrade from Piper Sandler, who raised its rating on the stock to “overweight” from “neutral” and increased its target price. Additionally, KeyCorp experienced a nearly 20% jump after Canada’s Scotiabank acquired a minority stake in the U.S. regional lender in an all-stock deal worth $2.8 billion, while Hawaiian Electric faced a 12.4% decline after raising concerns about its financial situation in light of a recent settlement related to a wildfire incident in Maui.
Overall, the market remains cautiously optimistic as it awaits key economic data and earnings reports for further clarity on the state of the U.S. economy. The upcoming consumer price index report and retail sales figures will be closely scrutinized for insights into inflation trends and consumer behavior, which could influence future Federal Reserve decisions on interest rates. Amidst ongoing uncertainties and market fluctuations, investors are paying close attention to individual company performances and strategic developments that could impact stock prices in the near term.
