Wall Street closed higher as it awaited a key report on US inflation

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, US, September 9, 2022. REUTERS/Brendan McDermid

Stocks closed higher on Monday as Wall Street makes its final moves Ahead of a high-level report, the impact of inflation on the economy is expected to appear less severe last month.

The Dow Jones Gained 0.71%, Tech Nasdaq 1.27% and Standard & Poor’s 500 1.06 percent.

The inflationwhich is very high in the country, and the actions the Federal Reserve is taking to combat it, They have been the driving forces on Wall Street all year long. Economists expect Tuesday’s report to show that consumer prices were a 8.1% Higher in August of the previous year, but this inflation It wasn’t as bad as July’s rate of 8.5%.

a slowing down This will boost hopes that inflation peaked in June at 9.1% and is on track to decline again. This, in turn, may allow the Federal Reserve to avoid this worst case scenario for marketwhere short-term interest rates rise to levels that lead to a Recession And keep it that way for a long time.

“This week will be very revealing.”said James Demert, founder and managing partner of Main Street Research.

In addition to Tuesday’s main report on consumer price inflation, Wednesday’s report is expected to show The slowdown in wholesale inflation last month. Thursday’s report will show how American families have been Adjusting its spending amid rising inflationFriday’s report will show how much inflation households are preparing for in the coming years.

File photo of Federal Reserve Chair Jerome Powell (Reuters/Elizabeth Frantz)
File photo of Federal Reserve Chair Jerome Powell (Reuters/Elizabeth Frantz)

All of this data is crucial for the Federal Reserve, which is considering a rate hike at its meeting next week. Federal Reserve officials recently reaffirmed their plans to raise interest rates enough to slow the economy, as well as their commitment to keeping interest rates high long enough to ensure the job on inflation is done.

But as this trend continues in Tuesday’s report, many investors and economists are hopeful Inflation can return to more “normal” levels quickly, unlike in the 1970sWhen it took many years.

Jonathan Golub, chief US equity strategist at Credit Suisse, wrote in a report that Investors and economists expect inflation to decline in the next 12 to 18 months.

Markets are fully convinced that the Fed He will raise his short-term key rate by another 0.75 percentage point next week. But the hope is that easing inflation will allow the Fed to stay on its narrow path towardsoft landingfor the economy.

he is called, That higher rates slow the economy down enough to curb inflation, but not enough to cause a recession. Higher rates hurt the economy by making it more expensive to buy a home, a car, or anything else purchased on debt. It also lowers the prices of stocks, bonds, and other investments.

Many traders expect the Fed Start lightening up your price hikes After next week and until the end of the year, before maintaining price stability until the first half of 2023.

naturally, These hopes could create disillusionment on Wall Street. The economy has already given false hope about inflation, hoping that it has passed its peak to start accelerating again.

Demert said the broader market is looking at inflation not only peaking, but also beginning Significantly cool down. He said strong hopes from Tuesday’s inflation report “will probably not be good for stocks.”

Wall Street economists remain divided over whether the US economy will go in this direction Recession Next year due to higher interest rates and other factors.

The Fed has already raised short-term interest rates four times This year, his violent moves have helped the US dollar appreciate against many other foreign currencies.

Dollar strength helps Reducing inflation in the country by lowering the prices of raw materials and importsBut it could also hurt the profits of US companies that do a lot of overseas sales. The dollar gave up some of its gains on Monday after falling against the euro, pound and other currencies.

Treasury yields were mixed. The 10-year Treasury yield, which helps control the direction of mortgage rates and other lending rates, is back at 3.35%, near its highest level in more than a decade.

Yield stayed for two years, which tends to track expectations for Fed action Fixed by 3.56%. It is still near its highest level since before the 2008 financial crisis.

(with information from AP)

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