Last week, the broad S&P 500 index gained 0.7% and ended the week at historic levels of 4,468 points. The Nasdaq 100 tech index added 0.2%, remaining slightly below the historic high, but the capitalization of the Dow Jones Industrial Average rose 0.9%, and the indicator itself conquered historic highs at around 35,515 points. Investors were encouraged by the news that the US Senate has approved an infrastructure bill with over $ 1 trillion in funding. Now it must be considered by the House of Representatives. In addition, a new $ 3.5 billion stimulus package was proposed that will fund social goals and fight poverty.
The markets were also supported by the July macro statistics on consumer prices. The CPI in the US jumped 5.4% in July versus the same month last year against market expectations of 5.3%. Thus, inflation remained at the June level and was the highest in almost 13 years - since August 2008. The figures turned out to be slightly worse than the forecast, but the dynamics turned out to be much better than in the previous several months. Investors are studying the statistics, trying to understand how they will affect the Fed's plans to curtail the buybacks. September labor market and inflation figures will be fundamental for the Fed's monetary decision in mid-September.
US producer prices (PPI) jumped 7.8% in July from the same month a year earlier, according to data from the country's Labor Department. These are the highest growth rates since the beginning of the calculation of the indicator in November 2010. Analysts on average predicted a less significant rise - 7.3%. The PPI data in the time perspective, as a rule, correlates with the consumer price index, so the growth of the indicator may indirectly indicate the growth of inflation in the coming months, which may partly testify in favor of the tightening of monetary policy in the United States. The number of Americans applying for unemployment benefits for the first time last week fell by 12 thousand to 375 thousand, according to a report from the US Department of Labor. This is the lowest level since the end of June.
In recent months, representatives of the Federal Reserve are increasingly speaking out in favor of the regulator beginning to roll back stimulus measures introduced to support the economy amid the coronavirus pandemic. Federal Reserve Bank Kansas City Federal Reserve Bank President Esther George believes the Fed has made sufficient progress in realizing its growth and employment targets to complete its $ 120 billion monthly Treasuries and mortgage-backed securities program. "The recovery is underway and should be followed by a shift from extraordinary monetary policies to more neutral ones," George said during a speech at the National Association for Business Economics. The growth of economic activity of households and enterprises will continue against the backdrop of the return of people to jobs and the persistence of high consumer spending, which will create conditions for adjusting monetary policy in the coming months. This could mean that the Fed may begin to phase out stimulus measures for the US economy by the end of this year.
On Monday, investors will be awaiting macroeconomic data from the US and China. US Empire State Manufacturing Index to be PublishedManufacturing for August, while China is due to release important data on retail sales and industrial production for July. On Tuesday, the US is to publish July statistics on retail sales and industrial production, as well as a preliminary estimate of the eurozone's GDP for the second quarter. On Wednesday, the minutes of the July Fed meeting will be published, from which the market will be able to learn some of the nuances of the meeting. On Thursday, the US index of leading economic indicators for July will be released.