Anika Begay
Stocks performed strongly on Tuesday following the release of the latest U.S. wholesale inflation report. However, investors should proceed with caution, according to Evercore ISI. The Wall Street research firm warned Tuesday that monthly PPI readings have little correlation with the more widely followed CPI, which can have a much greater impact on the stock market. The CPI reading for July showed a 0.1% increase, lower than economists expected. In other words, just because the CPI rose less than expected doesn’t mean investors should expect a weak CPI report on Wednesday. Stephen Stanley of Santander US echoed that sentiment. “Financial markets seem to overreact to the CPI each month,” said Stanley, the bank’s chief economist. [It] has limited implications for the consumer price index, [which] That said, if the July CPI data released Wednesday adds credibility to expectations of a Federal Reserve rate cut next month, it would likely give stocks another boost. The S&P 500 ended Tuesday’s session up nearly 2%, while the Nasdaq Composite rose 2.4%. The Dow Jones Industrial Average advanced more than 408 points, or 1.04%. The major averages are now well above the lows seen on Aug. 5, when the Dow and S&P 500 suffered their biggest one-day declines since 2022. .SPX 5D 5-day mountain chart “When you think about the upside, you’ve just had the normal August seasonality coupled with a ‘Black Swan’ event,” David Russell, global head of market strategy at TradeStation, said Tuesday, referring to the weak July nonfarm payrolls report that helped trigger a global market sell-off early last week. “The data is not bad enough to be passed on to earnings yet. … We continue to expect double-digit earnings growth.”
