Week Ahead on Wall Street: Emergency Cut?

Estimated reading time: 5 minutes

Not When, But How Many

People may be in the thick of their summer vacations, but there’s no such thing as time off for financial markets. Last week was a prime example of that and judging by what’s on the calendar for this week, we’re likely to get another such reminder.

Several economic indicators will be updated, with each having the potential to make or break how investors think about the macroeconomic backdrop. Inflation releases (producer and consumer prices) will be particularly scrutinized, as they’ll help inform the path of interest rates. Lower than expected inflation reports could increase rate cut expectations, while hotter prints could have the opposite effect.

The Fed isn’t due to meet again until September, but some investors have brought up the possibility of an emergency inter-meeting rate cut. While such a thing is certainly possible, it has historically been rare and reserved for periods of sudden economic deterioration or financial market instability. Proponents of an emergency cut argue that the weak July jobs report and last week’s market volatility fit the criteria, but Claudia Sahm, economist, former Fed insider, and the creator of the Sahm Rule, as well as SoFi’s very own Liz Young Thomas disagree and think an emergency cut is not only unlikely but would even be counterproductive.
Instead of debating the timing of the first interest rate cut – September seems almost guaranteed at this point – a more interesting discussion is the magnitude of the cut and how many more will follow. Market pricing currently indicates a more than 50% chance that the central bank will cut by 50bps in September – more than the standard 25bp increment – followed by additional cuts in November, December, and beyond. So as economic data comes out this week, investors won’t be thinking about when cuts are coming. They’ll be thinking about how many are ahead.

Economic and Earnings Calendar

Monday

• July New York Fed Survey of Consumer Expectations: This is a measure of peoples’ expectations for inflation, jobs prospects, earnings growth, and more. 
• July Treasury Statement: This summarizes the U.S. federal government budget by tracking government revenues and expenditures.

Tuesday

• July NFIB Small Business Optimism: This measures how small business owners feel about current and future economic conditions. 
• July Producer Price Index: The PPI tracks price trends that producers face and is down significantly from its peak earlier in the cycle.
• Fedspeak: Atlanta Fed President Raphael Bostic will discuss the economic outlook in a moderated conversation. 
• Earnings: Home Depot (HD)

Wednesday

• July Consumer Price Index: The CPI is one of the most popular indicators for tracking consumer price trends and is a marquee release for market watchers. CPI has come down notably from its peak in 2022 but remains somewhat above pre-pandemic levels.
• Weekly Mortgage Applications: Mortgage activity gives insight on demand conditions in the housing market.
• Earnings: Cardinal Health (CAH), Cisco (CSCO)

Thursday

• August Empire State Manufacturing Activity: The New York Fed’s survey of manufacturing executives in the region on business conditions and their outlook. 
• July Retail Sales: This measures spending at retail stores and is a key indicator of consumer demand. 
• August Philadelphia Fed Manufacturing Activity: The Philadelphia Fed’s survey of manufacturing executives in the region on business coUS_AMATnditions and their outlook. 
• July Industrial Production and Capacity Utilization: The industrial sector accounts for much of the cyclical swings in economic activity. 
• August NAHB Housing Market Index: This index tracks how homebuilders feel about the current and future state of the single-family housing market.
• Weekly Jobless Claims: This high frequency labor market data gives insight into filings for unemployment benefits. Jobless claims have continued to show a labor market that remains strong despite having cooled.
• Fedspeak: St. Louis Fed President Alberto Musalem will discuss the economy and monetary policy. Philadelphia Fed President Patrick Harker will give a speech on the Philadelphia Fed’s Center for the Restoration of Economic Data.
• Earnings: Applied Materials (AMAT), Amcor PLC (AMCR), Deere & Company (DE), Tapestry (TPR), Walmart (WMT)

Friday

• July Building Permits and Housing Starts: Construction data is a leading indicator of business activity. 
• August New York Services Activity: The New York Fed’s survey of manufacturing executives in the region on business conditions and their outlook. 
• August University of Michigan Consumer Sentiment: How consumers feel about economic conditions affect their spending habits. This survey places a particular focus on inflation and its trajectory.
• Fedspeak: Chicago Fed President Austan Goolsbee will participate in a fireside chat at the Angeles Investors’ Q3 Summit & Awards Event.
• Earnings: Ross Stores (ROST)

Disclaimer
SoFi Securities (Hong Kong) Limited and its affiliates (SoFi HK) may post or share information and materials from time to time. They should not be regarded as an offer, solicitation, invitation, investment advice, recommendation to buy, sell or otherwise deal with any investment instrument or product in any jurisdictions. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
SoFi HK does not make any warranties about the completeness, reliability and accuracy of this information and will not be liable for any losses and/or damages in connection with the use of this information.
The information and materials may contain hyperlinks to other websites, we are not responsible for the content of any linked sites. The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi HK. These links are provided for informational purposes and should not be viewed as an endorsement. The risk involved in using such hyperlinks shall be borne by the visitor and subject to any Terms of Use applicable to such access and use.
Any product, logos, brands, and other trademarks or images featured are the property of their respective trademark holders. These trademark holders are not affiliated with SoFi HK or its Affiliates. These trademark holders do not sponsor or endorse SoFi HK or any of its articles.
Without prior written approval of SoFi HK, the information/materials shall not be amended, duplicated, photocopied, transmitted, circulated, distributed or published in any manner, or be used for commercial or public purposes.