Market Reactions: Analyzing CPI Data and Its Impact on Wall Street

Let's get to the big story breakdown.

Well, Wall Street is set to soar at the open as consumer prices rise moderately last month.

Now last week, Mega Captech led the market with InfoTech, as well as semiconductor stocks, generally trading well.

While earnings were a mixed last week.

CommServices climbed more than 3% as Mega Captech's strength offset some weak earnings from media and entertainment names, as well as consumer discretionary.

As we kick off a new trading week, I am joined by Michael Ranking, senior market strategist here at the New York Stock Exchange.

Michael, good morning.

Thank you so much for joining me.

Good morning, Remy.

Thanks for having me back.

Well, inflation figures making headlines this morning.

So what did you make of the CPI day?

Yeah, I mean, it's a pretty interesting reaction function.

You know, I wouldn't say necessarily that the numbers were better than expected.

I think you know when you look under the surface, right, we are seeing a little bit of an increase in the consumer goods side of things, but it's very mixed like.

You know, if you look at things like appliances, there were kind of big declines on a month over month basis and then if you looked at the services side, it came in a little bit hotter.

So I would almost argue that this was that it was flipped in terms of where markets had expected.

They'd expected to see kind of a hotter goods print and a better services side, and it was a little bit flipped, but I think what the overarching message that the market is.

Sending you right now is that the inflation data is not hot enough to really kind of pull the Federal Reserve back or hold them back and I think you know the gating item is really going to be that jobs report, you know, kind of at the beginning of next month and that's going to kind of really set the stage for kind of that September meeting, you know, if you have something similar to what we saw last month, you know, I would think that you're going to probably see a cut at that point.

Yeah, and based on what you just said, we saw some sharp downward revisions to non-foreign payrolls for the month of May and June, and we did get a weaker than expected July non-arm payrolls figure.

And as we count down to that jobs report that you mentioned, the beginning of September, we still have that Jackson Hole, Wyoming gathering taking place for the Fed ahead of that September meeting.

So what do you expect to see and what did you see in Fed funds' futures after the CPI?

So I mean I think they'll continue to You know, stick to the, you know, very similar messaging right and kind of set the stage for, you know, kind of rate cutting cycle as we move into the fall, you know, kind of bat Jackson Hole, and I think they'll continue along that you know we coming into the number this morning you were looking at Fed funds futures which were trading at close to 90% probability of a September cut.

I think that's probably increased a little bit here.

You saw more the front end of the yield curve moving lower, so 2 year yields kind of moved down.

5 or 6 basis points, you know, kind of on the initial reaction.

The longer you know, longer dated treasury yield, it's kind of held somewhat steady, you move down a little bit but not not not dramatically.

So I think markets are and you saw equity markets, futures move pretty sharply higher and actually some of the biggest, the biggest reaction function actually kind of happened in the crypto market where you saw kind of a very big move kind of in in crypto to the upside, kind of on this expectation that you're going to see rate cuts going.

Yeah, and while we're on the topic of rates as well as central banks, I do want to step back and look at what's happening not just in the US but also overseas since we're also looking at rates as well.

So when it comes to growth versus value, what are we seeing in the US versus other parts of the world?

Yes, so you know, especially kind of last week and over the last couple of weeks, or throughout much of this year or the last couple of years, you've seen kind of that AI theme and the growth side of the. equation you can really outperform you started, you know, we've gotten some fits and starts in terms of, you know, kind of that that value factor, you know, kind of starting to to try to to see some improvement in the breath, you know, you know, last week you know was very kind of top heavy in terms of the performance, right, very much Apple driven, kind of on the back of of them you kind of announcing some investment in the US and kind of not being impacted by.

Increase in India tariffs, right, so that that drove almost half of the gains in the S&P 500, you know, one of the, you know, kind of one of the factors that could start to shift some of the capital into kind of the more value oriented sectors, right, and down the capitalization scale would be this idea that you're embarking upon, you know, kind of a rate cutting cycle, right, so that that could start to you know kind of help that those areas of the market.

And Michael, you mentioned a key name there and that is Apple.

So we're keeping an eye not just on Apple, but also tech names in particular, semiconductor names and Nvidia as well as AMD and Intel making headlines.

So when it comes to what's happening with those names.

Tell us about the implications as well as impact.

Yes, so I mean what what we've really seen is, is, you know, more recently we've seen semiconductors that kind of really retake kind of some of that leadership status, you know, over the weekend we had, you know, the administration.

Uh, you know, telling Nvidia and AMD that they would need to, or they would be charging them 15% of revenues that they would collect 15% of revenues for the age of 20 chips or chips being sent to China.

I mean that's an interesting step and something that we haven't really seen.

So it's almost this idea of you know we've been tariffing imports and now we're actually like kind of putting a tariff on some exports, but that's That's a step that we haven't really seen.

The other side of the equation is that we've really started to see some weakness in the software sector, right?

Enterprise software has been under some pressure, you know, kind of the impact of AI, there's this the call that AI is impacting kind of that software sector.

So you're really seeing some divergence, you know, kind of under the surface in in that in that technology space.

Yes, Michael, finally, last but not least before I let you go, we'll be watching the S&P 500 very closely at the open, but what levels are you watching in today's session?

Yes, so I mean with where futures are you know right now we're probably kind of 1520 points below the all-time high, you know, from just before that jobs report, so that's kind of on the upside, on the downside, I think you're kind of, you know, we're still looking at That that pretty solid support level around 6150, 6200, you know, if you start to break below that 20 day, which we only did for you know, kind of one day, you know, since April, you know that would, that would kind of be kind of a little bit of a turning point here.

So I think that's right around 6330 or so.

OK, Michael, well thank you so much for breaking all of this down on this Tuesday morning.

Thanks for having me.

See you next week.

See you next week.