Inflation Eases, Fed's Path Uncertain, Market Surprises Abound
Updated: Aug 14
Inflation is showing signs of moderation, with a 3.2% y-o-y increase in July's CPI, in line with estimates. This is reducing concerns that the Fed will continue with its current rate hike campaign. Although futures markets assign a 10% probability to a 25 bps hike at the upcoming September 19-20 meeting, the Fed has emphasized its focus on incoming data and, given that the meeting is more than a month away, it is still premature to say that rate hikes have come to an end. Ninety-one percent of S&P 500 companies reported results. There were positive surprises in sales and earnings across all industries (80% beat estimates), influenced by analyst adjustments. Compared to 2Q22, sales were 0.38% higher and profits 8.26% lower, with the largest declines in energy, materials and healthcare.