The Day Ahead.

U.S. stocks finished higher on Tuesday as investors positioned themselves for Wednesday’s key consumer inflation report and corporate earnings later in the week.????

?? DJIA +0.93%, S&P 500 +0.67%, NASDAQ +0.55%?

Stocks pressed ahead for most of the session on Tuesday but began losing steam around mid-session and then rallied heading into the final hours of trade. Meanwhile, U.S. Treasury yields backed off from recent highs as the yield on the 10-year note fell below 4%.

The drop in the 10-year yield is being attributed to Monday’s data revealing inflation expectations on the part of consumers are dropping and over news of falling prices in the used-car market.?

Economic data was light on Tuesday but featured two sentiment gauges. Small business optimism as surveyed by the NFIB recovered for the month of June, while the IBD/TIPP revealed in its survey that economic optimism fell further into pessimistic territory and well below expectations. ?

Fed fund futures are resolved that a 25 bps hike is coming at the next Fed meeting on July 26, yet the outlook following the July FOMC is still unknown.

Looking Ahead

It’s all about tomorrow. On Wednesday morning, the U.S. Bureau of Labor Statistics will report June’s Consumer Price Index (CPI). The gauge is expected to show that annualized headline consumer inflation slowed from +4.0% in May to +3.1% in June. Meanwhile, the core reading, which excludes volatile food and energy costs is expected to slow from +5.3% in May to +5.0% in June.

Where’s inflation going? When’s this recession we all keep hearing about going to materialize? And is the Fed going to hike in the fall? These are the critical questions that are facing investors in this market. ??????

The totality of the data points to a rather confusing picture for the U.S. economy, and a very difficult task in finding answers to these questions. On the inflation front, the final stretch to the Fed’s 2% target could be a long one, and judging by recent price jumps in oil prices, the central bank has its work cut out for it. ??

What about the recession? Consider this: the yield curve has been inverted for some time, consumer confidence is low, industrial production is weak, and the availability of credit is shrinking. These are all leading indicators that continue to flash recession signals, as they have for some time—yet no recession.

The strength in the labor market appears to be throwing everything off, but at the same time, employment data is a lagging indicator. If we consider the recession of 1973-1975, job creation was fairly solid, payrolls didn’t start declining until nine months after March 1975. Moreover, unemployment was at historic lows at the start of the 1969-1970 recession.

Perhaps the first chapter of this new recession has yet to be written??

Then there’s the Fed, which basically started this inflation mess and which will eventually have to end it—even if it lands the U.S. economy into recession. A hike in July is evidently clear, a hike in the fall is another question and inflation rearing its ugly head again will set the tone.

June’s core CPI levels will offer a distinct clue of whether the inflation fight is going to linger for longer, while commodity prices hang in the balance for future headline figures.

Stay Tuned!

Key Events Ahead: CPI (Wed.), Fed Beige Book (Wed.), PPI (Thurs.), Big Bank Earnings (Fri.)

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?? Today’s Market Dashboard

Today’s Market Dashboard is a collection of important data covering markets, the economy, and news items we’ve monitored throughout the trading day.

Economic Data

• NFIB Small Business Optimism (Jun): 91.0 (Forecast: 89.9, Prior: 89.4)
• IBD/TIPP Economic Optimism: 41.3 (Forecast: 45.3, Prior: 41.7)
• 52-Week Bill Auction: 5.130%, Prior: 4.930%
• 3-Year Note Auction: 4.534%, Prior: 4.202%

Wires?

• [16:01 ET] Fed releases discount rate meeting minutes for May 22-June 14; Cleveland, Richmond, St. Louis and Dallas directors sought a hike.
• [07: 15 ET] US Defence Department Spokesman Kirby: Military to military dialogue with China still not open.
• [07:11 ET] China’s President Xi: We will ensure China's power system is efficient and flexible in supply and demand coordination.
• [07:10 ET] China’s President Xi calls for deepening reform in oil and gas market - CCTV.
• [06:40 ET] Taiwan plans massive safety drill to practise for possible China attack – FT
• [05:46 ET] OPEC Secretary-General Al Ghais: The global energy demand forecast to rise by 23% through 2045.

Source: FinancialJuice

Geopolitical Headlines

• NATO Disappoints Ukraine With No Set Timetable For Accession (RFE/RL)
• Five key watchpoints for the NATO summit (Asia Times)
• China’s Gallium Curbs a Headache for EV Carmakers (Asia Financial)
• Biden to meet with Turkey’s Erdogan and Ukraine’s Zelenskyy at NATO summit (POLITICO)

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THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INVESTMENT ADVICE.?

???SOURCES:?MarketWatch, Investing.com, CNBC, FinancialJuice, Reuters via Refinitiv