Producer prices dropped the most month-on-month since 2020, driven by falling energy prices. This followed a cooler CPI reading and a softer jobs number. Together these give the Fed room to stay on hold, at least for now, and traders have cut their bets on a rate move at this month's meeting.
One month of data does not make a trend. Christopher Wallace has said it may take several lower inflation readings to show real progress toward the 2% goal. Oil sits at a one-month high and ticked up again this afternoon after renewed tension in the straits, so the market keeps watching it. The soft data is welcome relief for Kevin Walsh, who has been testifying on the Hill this week.
Rotation into Chinese stocks
Money moved into Chinese ADRs today. Chinese tech has gained from a large flow of money leaving South Korea. The EWY and the FXI traded in opposite directions today, showing that split. The rally in Chinese stocks came even though the economy posted its weakest quarterly growth since covid. That weak number may have been read as good news, since it could push the government toward more stimulus. Helping too was word that Alibaba's AI model could be built into Apple's services in the country.
What comes tomorrow
TSMC reports tonight. Its sales numbers this week already gave a preview: the company pulled in $40 billion, up 36% year-over-year in the second quarter, helped by a 68% year-over-year jump in June. Taiwan-listed shares rose after that report, but the ADR came under pressure, though it was higher today going into tonight's print. Some argue the move is about market positioning right now more than the fundamentals. The reaction in the Taiwan session will set the tone for tomorrow morning in Asia.
Netflix earnings are also due, a big test for a company that has been struggling lately. There is the reaction to United to track, with attention on what the airline said on its call. Retail sales come next as the main macro event; they feed into GDP and show how the consumer is holding up. Both Delta and United report that people are paying for the front of the plane. Pending home sales will give a read on the housing market.
