US Open: NFP Has Shifted Fed Expectations, and Wall Street Now Awaits Inflation

Wall Street returns to trading today after the extended Labor Day weekend, with the market having had several days to digest a significantly stronger-than-expected U.S. jobs report. On Friday, nonfarm payrolls increased by 162,000, compared with expectations of just 55,000, while the unemployment rate came in at 4.1%. Such strong data clearly changed expectations for Fed policy and pushed the probability of a rate hike in September to around 60%.

The second week of September will therefore be primarily about answering the question of whether a strong labor market is actually forcing the Fed to take a more decisive approach. The macroeconomic calendar is particularly important this week. On Thursday, investors will receive the latest producer price inflation (PPI) data, followed a day later by the more important Consumer Price Index (CPI). These readings will be particularly significant because, following Friday’s NFP report, any signs that price pressures remain elevated could further increase expectations of a rate hike.

Oil prices are also once again at the center of attention. Rising tensions in the Middle East and the situation around the Strait of Hormuz have pushed Brent crude toward $100 per barrel, further complicating the Fed’s position. Higher energy prices not only increase costs across the economy but also create the risk of renewed inflationary pressure. This means markets now have to consider both a strong labor market and the possibility of an energy shock at the same time.

However, even a higher-than-expected CPI reading may not necessarily change this view, particularly if most of the inflationary pressure is driven by a sharp rise in energy prices. The Fed may choose to wait out the shock and assess whether it proves temporary rather than responding immediately to a single set of data.

As a result, the coming days could bring increased volatility to Wall Street. Investors will be closely watching oil prices, U.S. Treasury yields and the latest inflation data as they try to determine whether a September rate hike is genuinely becoming a realistic scenario or whether current expectations have simply become too aggressive.

Source: XTB Research

Futures on the S&P 500 (US500) are currently hovering around the reference level with no clear direction, while investors remain cautious ahead of new market catalysts. Inflation data due later this week will undoubtedly attract significant attention. The readings could have an important impact on expectations for the Fed’s next decisions and the direction of the U.S. stock market.

Source: xStation5

Company News

Intel (INTC.US) shares are rising strongly following more positive assessments of the company’s outlook and reports of potential price increases. The improvement is being supported by progress in the company’s turnaround, continued shortages of server processors and potential benefits from its cooperation with Tesla on the Terafab project, which could further support the development of Intel’s manufacturing business.

Qualcomm (QCOM.US) has partnered with Amazon to develop new solutions for data centers used to support artificial intelligence. The cooperation could help Qualcomm strengthen its position in the rapidly growing AI market and expand its presence beyond its traditional smartphone business.

GE Aerospace (GE.US) plans to acquire a company that manufactures components for aircraft engines for approximately $12 billion. The deal is intended to give GE greater control over the production of key components and help the company prepare for growing demand for aircraft and replacement parts.

PepsiCo (PEP.US) is expanding beyond its traditional snacks and beverages business, with a greater focus on fresh and refrigerated food, ready-to-eat meals and products sold in other parts of grocery stores. The company is adapting its offering to changing consumer habits, including the growing popularity of GLP-1 medications.

Bristol Myers Squibb (BMY.US) reported positive results from trials of a new therapy for one type of blood cancer. The results increase the chances of further development of the treatment and could strengthen the company’s position in the cancer treatment market in the future.