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Fed decision and inflation reports will rock markets
If you ask Wall Street and anyone buying a home or selling an office building what they dream of, it’s simple: lower interest rates.
And they may be a bit nervous. They heard noises all last week that the economy was slowing. Prices were falling. Layoffs were expanding. Bond yields were falling.
The conventional wisdom said the Federal Reserve would starting cutting rates, perhaps by September.
And then the jobs report for May, released Friday, said job growth was terrific, but the unemployment rate was above 4% for the first time since January 2022.
Related: Surprise jobs report pummels Fed rate-cut bets
The job-growth data killed, at least on Friday, the rate-cut-is-at-hand idea.
The Fed meeting is the big event of the week ahead.
Normally, it’s quiet the week after the jobs report is issued. This time, there’s a lot to watch, from more inflation data, how investors deal with Nvidia’s (NVDA) giant stock split and, lastly, the continuing fight over how much Elon Musk should be paid at Tesla (TSLA) .
Markets stumble on the jobs report
Stocks fell Friday (though not a lot) on the jobs report for the day and mostly for the week. Bond yields and consumer rates moved up. The questions surrounding rates, however, are still on the table, including:
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What constitutes a sustainable path of inflation moving toward 2% a year. That’s what the Fed is always harping on.
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Is the Fed confident the economy is not slowing down?
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How will the Fed respond to rate-cutting moves by other central banks? The European Central was the latest to cut its rate this week.
They may dominate the press conference Fed Chairman Jerome Powell will hold Wednesday afternoon after the Fed announces its latest decision on interest rates.
What will the Fed decide? Probably to leave rates alone, with the Fed’s key federal funds rate left at 5.25% to 5.50%. That’s where it has been since July 2023.
The Federal Open Market Committee, the Fed’s rate-making body, has been focusing for the last two years on wringing the domestic inflation rate down almost to the exclusion of everything else.
One last note about the Fed. This is a meeting where the members of the FOMC pencil in their best guesses about where the economy and interest rates are headed.
The Fed’s website will report their guestimates in what’s known as the dot-plot. It’s not official, but investors take it very seriously.
CPI and PPI demand attention
At the same time the Fed meets to discuss policy, two big inflation reports come out: the all-important Consumer Price Index report on Wednesday and the Producer Price Index on Thursday.
The first is increasingly controversial because its methodology is heavily weighted toward housing costs. The second measures how prices are changing on goods produced.
The CPI report for May is expected to show prices rising at a 3.4% annualized rate, unchanged from April, with the core CPI at 3.5%, down a little from April.
The PPI is expected to show an increase of 2.2% from May 2023.
More on markets and the economy
Will Apple finally embrace AI
Apple (AAPL) has been noticeably quiet about climbing onto the artificial intelligence bandwagon, only promising to announce something this year.
This week, the iPhone maker will hold its annual developer conference in Cupertino, Calif., and there’s speculation that there may be details on Apple’s AI plans.
There will also be announcements of upgrades to various products and maybe a new iPhone.
PC Magazine says there’s talk the iOS 18 system may offer a feature that translates the spoken word into notes for the user.
Apple’s shares have struggled this year, up just 2.3% to $196.89 on Friday and 2.4% this past week. Its 52-week high was 199.62, reached on Dec. 14, 2023.
But something is brewing. The shares are up 19% since April 19.