Inflation and Disney: What to watch this week

Myles Udland · Head of News
Updated 6 min read

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The stock market's pristine 2023 rally hit a rough patch as July turned to August.

The July jobs report showed the labor market continues to cool, Apple (AAPL) reported a mixed quarter, and Fitch Ratings hit the US government with a surprise debt downgrade during a week that saw the S&P 500 and Dow Jones Industrial Average snap three-week winning streaks while the tech-heavy Nasdaq Composite fell nearly 3%.

On the flip side, a strong earnings report from Amazon (AMZN) sent shares of the tech giant up 8% on Friday, the stock's biggest one-day gain since November 2022.

In the week ahead, inflation data for July and earnings out of Disney (DIS) will highlight the calendar, with the schedule showing clear signs of deceleration after investors have been deluged with key earnings and economic reports over the last three weeks.

Economists expect Thursday's Consumer Price Index (CPI) report to show headline inflation rose 3.3% over the prior year in July, an increase from the 3% jump seen in June, the smallest rise in consumer prices in over two years.

On a "core" basis, which strips out the costs of food and energy, economists expect that prices rose 4.8% from last year in July, unchanged from June's annual rise.

"We expect the disinflationary trend continued in July and estimate a 0.2% bump in both the headline and core measures over the month," economists at Wells Fargo wrote in a note on Friday. "Through the monthly noise, inflation appears set on a downward path. However, progress in the coming months is likely to be slower and noisier than June's print alone would suggest."

Wells Fargo expects to see that headline prices rose 3.3% and "core" inflation jumped 4.7% over last year.

This report will serve as the latest piece of what will be a robust set of data presented to the Fed before their next policy decision on September 20.

The July jobs report on Friday showed the US economy added 187,000 jobs last month, fewer than expected, while the unemployment rate fell to 3.5%. Wages were firmer than forecast, rising 4.4% over last year, but some economists expect that in light of increased worker productivity, the Fed is unlikely to see this as an additional inflation impulse.

Bob Schwartz, senior economist at Oxford Economics, said on Friday the jobs report had "something for everyone."

"Simply put, the latest jobs report is as close to a Goldilocks outcome as could be hoped," Schwartz added. "For one, it pushes recession fears further onto the back burner. ... For another, the jobs report provides encouraging news for inflation doves, who believe the Fed should take its finger off the rate-hiking trigger."

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