signs of cooling inflation.
The S&P 500 to fresh record highs now softer than expected.
PPI does come on the heels of CPI, and they do have Fed watchers betting that central bankers will keep rates on hold next month, at least for now.
But even as bond yields to retreat and oil deploy historic 30 year Treasury auction that reveal ongoing concerns for US deficits as well as massive corporate borrowing at the same.
Global AI demand continues to drive rallies overseas.
Well here to break down the trading floor action today is Eric, market strategist at the New York Stock Exchange.
Eric, happy Friday to you.
Thank you so much for joining me.
Happy Friday to you, Ramy.
It's always a pleasure to be here.
Well, a lot of data to sift through this week, in particular those inflation figures and of course this morning retail sales.
So I do want to take a look at the retail sales figures, especially.
Target and Walmart earnings that are coming down the pike.
So what do you make of what we saw?
Yes, you know, the headline was weak, but some of it though is, you know, gasoline prices, right?
So that was definitely lower, not surprising because gas came in.
But the other thing to note is that the non the nonphysical store component, which is like basically online.
Retailers that was substantially lower, substantially weaker.
Prime Day got shifted into June, so a lot of that, you know, internet buying kind of happened at the end of June.
So July saw the downtick, which is not terribly surprising.
So I think that played, how much it played into it, I don't really know, but it was definitely a component of that downtick.
So it was weak.
I don't think taking one thing from, you know, taking one. definitive thing away from one report is a good idea ever and especially one where there's a lot of moving pieces like the retail sales which was not robust but certainly has some you can definitely say well it wasn't robust because of these issues and maybe it was a one off.
Yes, and of course I do want to get your perspective on the recent economic data when it comes to the labor market as well as inflation and what all of this means for the central bank, the Fed, ahead of its meeting.
Yes, so you know the inflation prints this week were relatively cool.
They were certainly not gangbuster cool.
It wasn't like we broke the back of inflation at all, you know, again, it kind of continues the narrative of inflation.
Slowly ticking lower, you know, at least stable.
It's not moving real higher.
Part of that is oil is moving up and down, but you know it just looks like we're kind of in this level to slightly down trending inflation environment and so you just saw that in how the market reacted to rate cut expectations basically they took down rate hike expectations.
Into December we're now pricing in one, maybe a little less than one cut for the full year.
It was higher than that before the CPI prints.
So you know I think I think now the market is kind of resetting to like, OK, maybe not a cut, maybe not a hike going in, but definitely rates may be higher at this level for maybe longer, maybe into 2027.
So you've seen the two years start to come in. with a rather large amount over the past month or two, but the 10 and the 30 year yields have kind of stayed at their levels.
They really haven't moved a lot.
Yesterday we saw the 30 year trying to come lower.
It did make a move, but it bounced off its low yield, kind of went back up a little.
So we'll have to see if that 30 year continues to try to move lower or if it's kind of stuck in that range.
Yes, and we'll continue to monitor the bond market as well.
As levels for the equity markets, especially on the heels of new record highs this week for the S&P 500, but as we head into the end of the month, as well as a new trading month, we'll be listening for comments coming out from Fed officials as well as Kevin Wars.
So tell us about the job that the central bank has.
Yes, so you know we're starting to see some of the dissenters kind of give their position.
Fed President Hammock was one of Key ones this week.
She was on the circuit a lot talking about her decision to vote for a hike and so you know it was basically just following the fact that inflation remains elevated.
It hasn't come down to our 2% target.
I want it down to 2%, right?
That's the basic narrative and you know you could certainly make an argument for it, but end of this month, so not next week or the week after, that's the Jackson Hole summit.
I think a lot of people are waiting to see how Warsh positions himself and how he talks.
To Jackson Hole, there was a lot of, not a lot of people gave him A plus grades in the last Fed meeting for his commentary.
So you know this maybe is another attempt for him to kind of provide the market with his strategy, with his thinking, with his outlook.
He doesn't like forward guidance obviously we know that, but I think there are other things he can talk about his thoughts on inflation overall, his thoughts on the balance sheet overall, what he wants to get, how he wants to change the.
At the end of the year with all these task forces, so you know, I think, I think part of the reason why yields the long end haven't come down is because there's a lot of uncertainty about Fed policy right now, a lot of uncertainty about what's going to happen.
So I think helping him or having him in this really big conference is definitely going to be something that the markets are going to be focused on in the next two weeks.
Yes, and another area we continue to monitor is earnings, even though the The official season is winding down, so we will be hearing from the retailers, but there has been a lot of focus obviously on the AI trade.
So here we are about mid August and we're awaiting those retail earnings.
But what do you make of what we've seen so far in AI and what do you make of these sectors?
Yes, I mean, the earnings have been on the surface they've been really good, right?
They've been really strong.
Every CEO that's talking is saying how he or she is seeing unprecedented demand.
And ramping demand, demand at the 2027.
I mean, it's just the superlatives.
I don't know if they can find any more superlatives.
We know that demand is extremely strong, at least in 2027, so that's kind of taken care of.
The numbers have been really good, but the expectations have been set so high that you haven't seen strong stock reactions to all of those earnings results that have been priced in already, so you've actually seen a lot of A lot of times these companies provide good results, but they're selling off.
Not all of them, but they're selling off.
But in general, the AI ecosystem, to answer your question, it seems to be very healthy.
It seems to be capable of driving this market higher, and we kind of saw that this week.
There was a kind of rebid in the AI narrative across components, the hardware stocks, the data centers, the smaller data centers, not necessarily the hyper scales.
Some of the optical equipment names were.
Strong software was strong too, so you know tech in general was pretty good this year, this week.
Yes, and Eric, finally before I let you go, we have about 60 seconds here.
So geopolitics, that is something we all continue to monitor on a regular basis and we continue to watch what's happening with oil.
But given the fact that gas prices do remain elevated, what would you say to the American consumer out there?
Yes, I mean, I see it every day driving around.
Neighborhood, right, it's not it's the gas prices at the pump that hurts, but then it's also, you know, everything that flows out of that, right?
It's the truckers that have to ship everything and get it from point A to point B, right?
Diesel prices, extremely high.
Everything is kind of flowing out of the energy prices into every other commodity.
It's still hard for the lower end consumer.
It's even hard for the middle consumer, the middle range consumer, to continually buy and buy and buy.
With that said, they're still holding strong.
The consumer has not cracked at all.
They're not showing signs of cracking in general, so I think the American economy is kind of on OK footing, not really worried about any imminent collapse or anything, but you definitely have to wonder how long these elevated prices.
Can be sustained before people really start to cut back because they've tapped into savings.
They've tapped into, you know, they've maxed out cars.
They're worried about funding their kids' education versus buying this new car or whatever.
So those types of questions as this continues on will have to be answered.
Yes, a lot to consider as we head into the fall months.
So I appreciate your time, Eric, and thank you so much for all of your insights today.
Have a great weekend.
Thank you, Remy.
Thank you.
