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Wall Street Starts Fresh Week Deep in Green

Despite a wet blanket being thrown onto market indices last Friday — after a stellar jobs report which signaled more significant interest-rate hikes to come from the Fed — the S&P 500 and Nasdaq completed their third-straight week of higher trading, with the Dow finishing just slightly under. More importantly, we’re another week removed from our 2022 lows in mid-June, which came precipitously fast after year-to-date highs in late March.

That steep volatility looks to have cooled somewhat; even our nearly two months bouncing off lows has been measured and temperate. And there appears to be more good news on the horizon, with strong jobs numbers galvanizing the economy now joined by the passage of the Inflation Reduction Act by the Senate — a news series of laws front-loaded to bring down inflation, and a measure many reporters on Capitol Hill thought was dead in the water not too long ago.

Aside from new incentives for producing clean energy domestically, the bill instills a minimum 15% tax for corporations, a 1% tax on stock buybacks, closing tax loopholes including expanding the IRS, and medical advancements such as Medicare being allowed to negotiate drug prices, insulin costs capped at $35 per month for seniors, and an extension for ACA subsidies. All 50 Senate Republicans voted against the measure, with Vice President Kamal Harris providing the deciding vote.

The big news this week will be Wednesday’s Consumer Price Index (CPI) report, which leapt a half-percentage point in June to +9.1% year over year — the highest figure we’d seen since early in President Reagan’s first term more than four decades ago. Month over month was also very steep: +1.3% from May to June, with +0.7% coming from core CPI. Year over year core (stripping out volatile food and energy prices) reached +5.9%.

Expectations for July are milder, with +0.2% or +0.3% expected month over month and +8.7% year over year. This still amounts to extreme inflation on headline, while core is anticipated to creep northward to +6.1% year over year — indicating that months of high fuel prices have now seeped into stickier areas of the overall economy. Month over month core is expected to tick down to +0.5% or +0.6%.

Combined with 528K new jobs created for July, which we saw in Friday’s non-farm payroll report, CPI reads well north of +8% this week will not likely convince the Fed to tap the breaks on interest rate hikes. The silver lining here, potentially, is that the Fed has several weeks to cool its jets and digest economic prints that bear the fingerprints of recent Fed interest-rate policy. Certainly we could do with a few nice surprises from now until the third week in September, when the next Fed meeting commences.

Tyson Foods (TSN) shares are selling the news this morning, following its fiscal Q3 earnings report out before today’s opening bell: earnings of $1.94 per share topped the Zacks consensus by 3 cents (though well off the $2.70 per share pace of a year ago) while revenues of $13.5 billion outpaced expectations by +1.4%. This marks the ninth-straight earnings beat for the meat-processing giant, which has now dipped into negative territory year-to-date, -4% in today’s pre-market. For more on TSN’s earnings, click here.

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