Inflation and Earnings Reports Await Investors After Holiday Week

As investors gear up for a new week of trading, a focus on crucial economic data and the start of second quarter earnings reports will set the tone. After a holiday-shortened week that saw stocks close near record highs, there is anticipation around the release of key reports and testimony from Federal Reserve Chair Jerome Powell.

Inflation Data

The release of June's Consumer Price Index (CPI) on Thursday will be a significant event for investors. Wall Street economists expect headline inflation to have risen by 3.1% annually in June, a slight slowdown from the 3.3% rise seen in May. The report will provide insights into the current inflationary trends and their potential impact on the market.

Federal Reserve Testimony

Federal Reserve Chair Jerome Powell is scheduled to give semiannual testimony before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday. Powell's comments will be closely scrutinized for any hints at the Fed's policy moves ahead of its upcoming meeting on July 30-31.

Corporate Earnings

Second quarter earnings season kicks off with major financial institutions such as JPMorgan (JPM), Wells Fargo (WFC), and Citi (C) releasing their results on Friday. Additionally, reports from PepsiCo (PEP) and Delta Air Lines (DAL) earlier in the week will provide insights into corporate performance.

Last week, the S&P 500 (^GSPC) and the Nasdaq Composite (^IXIC) closed near record highs, with the S&P 500 rising nearly 2% and the Nasdaq Composite rallying over 3%. Meanwhile, the Dow Jones Industrial Average (^DJI) gained a more modest 0.5%. Investors will be closely monitoring economic indicators and earnings reports to gauge the market's future trajectory.

Rate Cut Speculation

Following the release of the June jobs report showing signs of a slowing labor market, there is growing speculation that the Federal Reserve could cut interest rates in September. The rise in the unemployment rate and the slower job gains are contributing to the case for a potential rate cut, with investors currently pricing in a roughly 75% chance of a rate cut by September.