The market is exhibiting a blend of fear regarding US Consumer Price Index (CPI) data and optimism stemming from potential progress on a US-Iran deal. Analysts suggest that approximately 50% of the current market euphoria is attributable to hopes for a US-Iran agreement. This optimism is contributing to record stock levels and a rally in bonds, which further supports the stock market's performance, partly due to weaker oil prices.
The other 50% of the market's current state is attributed to technical relief and adjustments to recent Federal Reserve statements. Despite the widespread optimism, some investors are holding back due to a sense of deja vu concerning past unfulfilled promises of a deal, implying there could be even more upside if a viable and sustainable agreement is finally validated. Market volatility is still expected around key data releases.
Upcoming economic indicators, including the July CPI on the 12th, July PPI on the 13th, and July retail sales on the 14th, are under intense scrutiny. The market anticipates a 3.4% year-over-year rise in July CPI, a slight decrease from June's 3.5% but still above the Fed's 2% target. Core CPI, excluding volatile food and energy, is expected to rise 2.5% year-over-year, slightly below June's 2.6%. These figures are crucial given the unexpectedly weak July nonfarm payrolls report, which showed a loss of 23,000 jobs, far below expectations.
