As the market shifts focus from employment figures and Federal Reserve interest rate policy, this week centers on “Inflation Week,” with critical Consumer Price Index (CPI) and Producer Price Index (PPI) data arriving Wednesday and Thursday.
CPI Data: Will Inflation Continue to Cool?
On Wednesday morning, the July CPI report will be released, with analysts projecting a second consecutive decline in the headline inflation rate to +3.4% year-over-year, down from the previous +3.5%. This follows a peak of +4.2% in May, which marked a three-year high. When volatile food and energy prices are excluded, core inflation is expected to retreat to +2.5%, a level not seen since the beginning of the year.
If these figures align with market expectations, they could provide the Federal Reserve with the necessary justification to hold interest rates steady during its September meeting. While inflation appeared to be accelerating previously, the moderation of oil prices and transportation costs—aided by diplomatic developments—has helped stabilize the outlook, keeping investor sentiment cautiously optimistic.
The PPI Outlook and Market Implications
While retail inflation shows signs of cooling, the wholesale side remains more aggressive. The Producer Price Index (PPI) reported a +5.5% headline increase last month. Projections for Thursday’s July data suggest a slight dip to +5.1%. However, this remains more than 300 basis points above the Federal Reserve’s optimal inflation target. Because wholesale costs often act as a leading indicator for retail price trends, investors will be watching these figures closely.
A cooling trend in these reports would likely be welcomed by investors, potentially driving major market indexes toward new record highs. Conversely, inflation data that exceeds expectations could trigger a sharp downturn. Consequently, market activity is expected to remain muted until the CPI data drops on Wednesday.
Key Earnings to Watch: Cisco, AI, and More
Despite the majority of “Mag 7” companies having already released their quarterly results, the earnings calendar remains packed. Cisco Systems (CSCO) stands out as the week’s primary headliner, with its report scheduled for Wednesday afternoon. Additionally, the market will keep a close watch on AI infrastructure players, including CoreWeave (CRWV) and Nebius (NBIS).
Other notable reports include Rocket Lab (RKLB), a spacecraft and launch services provider, which anticipates Q2 earnings growth of +70% and revenue growth of +60.25% year-over-year. The company currently holds a Zacks Rank #4 (Sell) and has missed earnings estimates in four of the last six quarters. Meanwhile, Hims & Hers (HIMS) reports after today’s closing bell, with expectations of a -141% year-over-year decline in bottom-line earnings despite a +26.7% increase in revenue. HIMS is currently a Zacks Rank #3 (Hold).
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