Upcoming Economic Indicators: Inflation and Jobs Data in Focus

As we move into the upcoming week, the spotlight remains on the Federal Reserve's stance, with two crucial economic indicators on the horizon: the inflation assessment and the jobs report.

The spotlight falls on the release of the Personal Consumption Expenditures (PCE) index, the Federal Reserve's preferred gauge of inflation, slated for Thursday morning. Simultaneously, on Friday at 8:30 a.m. ET, the August jobs report is set to be unveiled.

Throughout the week, investors will closely track the weekly jobless claims data and ADP's monthly private payrolls report, both scheduled for Thursday. The monthly job openings overview on Tuesday will capture investor interest, alongside fresh insights into housing and manufacturing prices.

On the corporate side, the earnings calendar showcases heavyweights like Best Buy (BBY), Lululemon (LULU), and Salesforce (CRM), as the earnings season nears its conclusion.

Despite a challenging August for stocks, last week witnessed a reprieve, with the tech-oriented Nasdaq attracting investor interest ahead of Nvidia's (NVDA) robust quarterly earnings release.

As we enter the final stretch of August, the Nasdaq, S&P 500, and Dow Jones Industrial find themselves in negative territory over the past month.

Following a summer marked by positive economic surprises, Federal Reserve Chair Jerome Powell's recent remarks underscored the central bank's alertness. Powell acknowledged, "We are attentive to signs that the economy may not be cooling as expected."

This puts the spotlight on forthcoming data releases, which are crucial in gauging the economic trajectory.

Anticipated data on Thursday points to a 4.2% year-over-year increase in the "core" PCE, which excludes food and energy costs for July. This compares to a 4.1% rise in June. While the Fed targets an average inflation rate of 2%, the projection for "core" PCE in July is a 0.2% monthly increase.

Turning to Friday, economists are focused on the labor market's impact on inflation. Predictions are for the US economy to have added 168,000 jobs in August, while the unemployment rate remains steady at 3.7%. This aligns with the gradual labor market slowdown observed recently.

Powell's emphasis on the potential for a tighter labor market to spur inflation implies the significance of data trends. The anticipated job report for August is also expected to reflect the influence of ongoing labor strikes across various sectors.

Current market sentiment factors in a 47% probability of an additional Federal Reserve rate hike by the end of November, up 14 percentage points from the prior week, based on the CME FedWatch tool.

Recent retail earnings painted a picture of a cautious consumer sentiment, impacting retailers like Dick's Sporting Goods (DKS) and Foot Locker (FL). Store-related crimes have also been a concern and will continue to be closely monitored.

In the upcoming week, the earnings results from Best Buy and Lululemon will offer a fresh perspective on the sector. Of particular interest is Lululemon's performance, as it serves as an indicator of high-end consumer behavior.

In the technology arena, Salesforce (CRM), Okta (OKTA), and Crowdstrike (CRWD) will unveil their earnings post Nvidia's influential announcement. Salesforce's focus on AI introduces an interesting dynamic, given mixed market responses to AI-related narratives this quarter.

Nvidia's remarkable revenue growth and earnings beat sent ripples through the tech sector. However, it's worth noting that Wall Street's AI darlings like C3.ai and AMD experienced declines in the aftermath, sparking discussions about the evolving AI landscape.

According to Citigroup's Scott Chronert, the AI hype has entered the "show me" phase. This implies a recalibration of expectations as new information surfaces.

As the week unfolds, the economic calendar is packed with events:

Monday

• Economic data: Dallas Fed Manufacturing Activity

• Earnings: No notable earnings.

Tuesday

• Economic data: S&P CoreLogic Case-Shiller Home Price Index, Consumer Confidence, JOLTS Job Openings, Dallas Fed Services Activity

• Earnings: Best Buy (BBY), Big Lots (BIG), BMO (BMO), Box (BOX), and more

Wednesday

• Economic data: MBA Mortgage Applications, Wholesale and Retail Inventories, Second Quarter GDP and Personal Consumption, Pending Home Sales

• Earnings: Chewy (CHWY), Crowdstrike (CRWD), Express (EXPR), and more

Thursday

• Economic data: Personal Income and Spending, PCE Inflation, Initial Jobless Claims, Challenger Job Cuts

• Earnings: Academy Sports + Outdoors (ASO), Broadcom (AVGO), Campbell's (CPB), and more

Friday

• Economic data: Nonfarm Payrolls, Unemployment Rate, Average Hourly Earnings, S&P Global US Manufacturing PMI, Construction Spending, ISM Manufacturing

• No notable earnings.

Also Read: Federal Reserve Chief Powell Talks About Possible Changes in Interest Rates Due to Inflation