Week of July 12, 2024 Weekly Recap & The Week Ahead
“You need to know very well when to move away, or give up the loss, and not allow the anxiety to trick you into trying again.” – Warren Buffett1.
1. Powell Inches the Fed Closer to Cutting Rates — Federal Reserve Chair Jerome Powell made a subtle but important shift that moved the central bank closer to lowering interest rates when he suggested Tuesday that a further cooling in the labor market could be undesirable. Powell conceded that he wouldn’t have arrived at such a judgment as recently as two months ago—and indeed, the Fed leader was more measured in comments made at a conference in Portugal last week, before the release of the June employment report by the Labor Department. Behind the shifting outlook is labor-market data showing a slowdown in hiring and a mild but steady increase in the share of Americans looking for work amid an increase in the workforce, due partly to more immigration.
2. Biden Tightens Trade Rules for Steel, Aluminum From Mexico — The U.S. will levy a 25% tariff on Mexican imports containing steel from China and a 10% duty on products made with aluminum from the country, the White House said. Products from Mexico typically enter the U.S. duty free as part of a trade agreement with Canada and Mexico. Steel and aluminum must be melted and poured in the U.S., Mexico or Canada to qualify for duty-free treatment, according to the White House.
U.S. steelmakers and other manufacturers have complained that China is circumventing the existing tariffs on steel and aluminum by routing the metals through Mexico. The U.S. government has said steel and aluminum exported from China are unfairly priced and benefit from unlawful government subsidies.
3. Milder Inflation Opens Door Wider to September Rate Cut — The consumer-price index, a measure of goods and services costs across the economy, fell slightly from May, dropping the year-over-year inflation rate to 3%, which was the lowest since June 2023. Core prices, which exclude volatile food and energy items and are seen as a better gauge of underlying inflation, rose just 0.1% since May. That was the mildest increase since January 2021, when large swaths of the economy were still frozen by the pandemic.
Altogether, the report showed prices cooled broadly in the second quarter and were below economists’ expectations—the reverse of what happened in the first three months of the year, when inflation was surprisingly brisk. The report keeps the door wide open to a September interest-rate cut. Earlier this week, Fed Chair Jerome Powell laid the groundwork to cut by suggesting the labor market is slowing in a way that has diminished a major source of inflation and risks further weakness that wouldn’t be desirable.
4. Wholesale prices rose 0.2% in June, slightly hotter than expected — The producer price index climbed 0.2% last month, the Labor Department’s Bureau of Labor Statistics reported Friday. Economists surveyed by Dow Jones were expecting a 0.1% increase for the index. The PPI is now up 2.6% over the past year.
The PPI is a gauge of prices that producers can get for their goods and services in the open market. In June, a rise in the price for services offset a decline for goods. The hotter-than-expected PPI reading runs counter to recent data that shows inflation declining, though economists and investors tend to put more weight on the consumer-focused inflation readings. The central bank’s next policy meeting is at the end of July, where it is widely expected to hold rates steady. Traders have increasingly dialed in on the September meeting as the likely time for the first rate cut.
The week ahead — Economic data from Econoday.com:
