After a turbulent week, this week's focus on US stocks turns to a series of key economic indicators and corporate earnings - July CPI inflation, retail sales data, initial jobless claims, the profits of global retail giants... Investors will determine whether US households face more inflation and pressure from higher interest rates. In terms of product structure, operating income for 10-30 billion yuan products amounted to 401/1,288/60 million yuan, respectively, with an overall sales volume of 18,000 kiloliters, a 28.10% year-on-year increase.

"After concerns over hard-landing risks led to a brief Wile E. Coyote moment, the financial markets have temporarily stabilized," said economists from the Bank of America global research team led by Michael Gapen. "From now on, data will tell us whether the US economy is slowing down or plummeting dramatically."

Where is inflation heading?

US July CPI will be released on Wednesday evening. Economists expect the overall CPI for July to remain at a year-on-year increase rate of 3%, while core CPI, which excludes the volatility of food and energy costs, is expected to slow down from 3.3% in June to 3.2%, coming in at the lowest since May 2021, a result that should boost expectations of interest rate cuts.

Brian Weinstein, head of global markets at Morgan Stanley Investment Management, said that since it has been rare for the CPI to remain below 2% historically, inflation will stay at a higher level than the Fed's target for some time.

Weinstein told reporters over the phone:

There seems to be inflation in some painful areas like car and home insurance, especially in places with an increased population, where money is taken out of consumers' pockets every month.

He also mentioned that “geopolitical conflicts and uncertainty over economic policies after the US election” would be enough to prevent inflation from returning below 2%. The July PPI data, released on Tuesday, will provide more clues.

Focusing on consumer data and retail giant earnings

For the "super data week," some believe that the retail sales and initial claims data to be released on Thursday may be more important than PPI and CPI inflation data, as the downward trend in inflation is already a market consensus, while the main determinant of whether the Fed will cut interest rates by 25 basis points or 50 basis points in September is the economic situation.

Consumer spending has remained weak and has already begun to affect corporate earnings.

Luxury goods group LVMH's financial report shows that revenue in the Asian market (excluding Japan) has declined since the second quarter. mcdonald's (MCD.US) Last week's financial report showed that inflationary pressures have made consumers, especially low-income families, more picky about how they spend their money, and the leisure rental platform $Airbnb (ABNB.US)$It is expected that leisure travel business will slow down because consumers are delaying booking overnight stays in uncertain economic prospects.

Years of persistent inflation and Fed tightening cycles have squeezed US households, who have exhausted their savings accumulated during the pandemic and have been forced to "downgrade their consumption."

Brad Conger, chief investment officer of Hirtle Callaghan & Co., said:

Most consumer-focused companies, such as $Starbucks (SBUX.US)$and McDonald's, have issued profit warnings, which impresses me that this is undoubtedly a very difficult consumer environment. This indicates that consumers' suppressed savings have been exhausted, and so has their confidence in their jobs and future income.

The purchasing power of American consumers will make the earnings reports to be released by some retail giants this week another focus of the US stock market.

$Walmart (WMT.US)$And.$Home Depot (HD.US)$are both planning to release earnings reports on Tuesday and Thursday, and the market is looking forward to getting more clues about consumer conditions from these companies that sell daily necessities.

Conger said that weak consumer spending could spread to other parts of the consumer sector.

"People are cutting back on all kinds of expenses, which means that businesses will cut back when planning to hire, which will then feed back into employment and income."

Despite this, last week's labor market data showed some positive signals, with first-time jobless claims for the week of August 3 posting the largest drop in a year, indicating that the labor market may still be stable, providing the market with a ray of comfort.

Investors are already jittery.

Analysts predict that market volatility will increase due to geopolitical conflicts and uncertainty brought by the economic plans of the 2024 US presidential candidates. A Citigroup report stated that traders are expected to see at least 1.2% volatility when the CPI report is released on Wednesday. $S&P 500 Index (.SPX.US)$There will be at least a 1.2% fluctuation.

Although this does not necessarily indicate an economic hard landing or recession, market instability may limit the upside potential of the stock market.

Conger said:

The US stock market is a little panicked and fragile... but small surprises in economic data won't create big market changes in sentiment, which means that if there are more positive data points in the coming weeks, each will gradually have a smaller impact on the market.

Currently, the market is so fragile that it is likely to overreact.

Weinstein holds a similar view, stating that the market will experience more volatility, which may "limit" the upside potential of the stock market.

But I don't think this means a hard landing, and the US economy may not necessarily decline.

Editor/ping