With the unemployment rate inching up, the market is at ease that the policymakers will not tighten the monetary policy further. However, if inflation continues to go up, the Fed will certainly live up to its promise and hike rates despite the fact that the economy is still not at full-employment.
There will be ample Q2 earnings reports to keep investors busy shuffling their portfolios this week, but the focus will be on a handful of companies like Targa Resources Inc. (TRGP ), which recently started paying dividends and its current yield is off the charts.
When Fed Chair Jerome Powell commented that the inflation forecast was “roughly balanced” last month, he was perhaps referring to the fact that month-over-month CPI only grew by 0.1% in June. Even if we consider the core inflation, it only grew by 0.2% last month. So, certainly, the economy has cooled down a bit as inflation is under control and the unemployment rate continues to flirt with the 4% level.
Nonetheless, if we see better-than-expected inflation this week, it could raise a few eyebrows as there will be a concern about rising rates to create a minor panic in the market.
To sum up, we will get a handful of economic data this week, but the mood of the market will be largely dictated by the JOLTS job openings figure on Tuesday and the CPI rate on Friday.
Check out last week’s Market Glance here in which investors focused on the Fed’s Dilemma about whether to respond to the comments from the White House.