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US CPI and Second Quarter Earnings Reports in Focus

Miguel A. Rodriguez
Miguel A. Rodriguez
11 July 2023

Investors will keep a keen eye on the US Consumer Price Index (CPI) for June and the earnings reports for the second quarter that will continue to come out this week to assess the economy’s reaction to tight monetary conditions. 

US CPI to be released tomorrow

In anticipation of this week's release of the US CPI for June, a crucial inflation indicator, US indices began the week modestly.  

Non-farm payroll data, that was released on Friday, showed fewer jobs than expected, but without showing signs of a reduction in wages yet, which is what the Federal Reserve (Fed) intends with interest rate hikes.

Treasury yields decreased but this didn't prevent stocks from ending the week in the red.

Reuters poll expects consumer price growth to have slowed in June

Despite the yield curve further inverting during the session, investors' biggest worry is still the prospect of a severe slowdown in the economy.  

These worries about an impending economic slowdown were fuelled by weak Chinese data reported on Monday.  

This week's US inflation statistics will be closely watched since it will have an impact on the Fed's decision later this month. The good news is that according to a Reuters poll of experts, consumer price inflation probably slowed in June.

Earnings reports could sway the stock market

The earnings reports and economic reports, that start to be released this week, are expected to have the biggest impact on the stock market.  

Investors will evaluate how tight monetary conditions have affected company profits during the second quarter earnings reporting season to determine whether their concerns about an economic slowdown are justified.

IEA report sees increase in demand for natural gas

In conclusion, yesterday was a day of moderate volatility, with few meaningful changes in the market, and a slight fall of the US Dollar following its decline at the end of last week due to falling bond yields.  

Despite data provided last week suggesting a rise in Gas storage, natural gas prices have recovered from their lows of last Friday. The most recent IEA analysis predicts that while gas production decreases throughout the summer, there will be a rise in demand for power generation during this time.  

DMO 11.07.2023 graph.png

Natural Gas monthly graph. Sources: Bloomberg, Reuters

Key Takeaways

  • CPI to shine a light on state of inflation
  • Non-farm payrolls showed signs of a reduction in wages
  • Reuters poll of economists shows expectation of consumer price growth slow down for June
  • Investors await second quarter earnings reports this week to assess the impact of tight monetary conditions
  • US Dollar slightly weakened yesterday
  • Latest IEA report foresees an increase in demand for natural gas over the summer

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Miguel A. Rodriguez
Miguel A. Rodriguez

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.