Inflation Ticks Higher, UAW Strikes, Arm's Record-Breaking IPO: The Week In The Markets

This week witnessed a flurry of economic data and market-shaping events ahead of the crucial
Sept. 20 FOMC meeting.

Inflation Surges, Driven By Gas

In August, the annual inflation rate in the United States saw its second consecutive increase, reaching 3.7%. This was a notable uptick from July’s 3.2% figure, surpassing expectations of 3.6%. On a monthly basis, the Consumer Price Index surged by 0.6%, marking its most substantial monthly increase since June 2022.

This spike was primarily fueled by a substantial 6% rise in gasoline prices. In a parallel trend, the Producer Price Index also displayed robust growth in August, with a 0.7% monthly increase, the highest level recorded since June 2022, outstripping market forecasts of a 0.4% uptick.

Core Inflation Downtrend Continues, Investor Confidence Holds

A different perspective emerges when volatile food and energy components are excluded from inflation calculations, an aspect closely monitored by the Federal Reserve. The core CPI experienced a slight decrease from 4.7% to 4.3% year-on-year, while the core PPI dropped to a year-on-year rate of 2.2%,
reaching its lowest point since January 2021.

This favorable trend in core inflation contributed to the maintenance of positive market sentiment. Investors displayed a high level of confidence this week in the Federal Reserve’s intention to retain current interest rates during the forthcoming meeting. Additionally, robust retail sales reports, indicative of strong consumer spending, further pushed back risks of a recession.

Stock Market Highlights

Tesla Inc. TSLA experienced a strong rally this week, up 3.8%, marking one of the best performances in the S&P 500 index, following Morgan Stanley’s upgrade of the electric vehicle giant to Overweight and a price target increase from $250 to $400 per share.

The chipmaker Qualcomm Inc. QCOM gained after securing a deal to supply Apple with 5G modems for smartphones until 2026. 

On a less positive note, shares of Oracle Corp. ORCL were down more than 10% on a weekly basis after the company missed revenue estimates. Netflix, Inc. NFLX tumbled 10.3% after the streaming giant downwardly revised its margin guidance.

The week also witnessed the highly anticipated debut of ARM Holdings plc ARM, Softbank’s semiconductor firm, with the largest IPO of the year, valued at an impressive $54.5 billion. Shares of ARM Holdings rose 14% in the first two trading days.

On Friday, the United Auto Workers launched a strike against all three major Detroit automakers — Ford Motor Co. F , Stellantis N.V. STLA and General Motors Corp. GM. The strike followed unsuccessful negotiations concerning wage increases and other employee benefits.

What To Watch In The Week Ahead

Looking ahead, all eyes are on the upcoming FOMC Meeting. The highly anticipated interest rate decision is slated for release at 2 p.m.Wednesday. Alongside this, the Fed will provide updated macroeconomic projections, offering insights into whether the central bank anticipates future interest rate hikes.

On the data front, housing starts and building permits statistics for August will be released on
Tuesday, while preliminary PMI figures for September from S&P Global are scheduled on Friday.

Additionally, corporate earnings will be in focus in the coming week. AutoZone Inc. AZO is set to release its earnings report on Tuesday, followed by General Mills, Inc. GIS on Wednesday. On Thursday, Darden Restaurants DRI and FactSet Research Systems Inc. FDS will report earnings.

Read now: ‘Bonds In A Multi-Year Bear Market’, Experts Sound Alarm On Further Rate Hikes As Oil Goes Haywire

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