This past week witnessed a flurry of economic data and market-shaping events, like the UAW initiating a strike against all of the Detroit Three automakers. The events are happening ahead of next Wednesday's crucial Federal Open Market Committee meeting, where the world is watching for another interest rate decision.
Gas prices drive up one measure of inflation
In August, the annual inflation rate in the U.S. saw its second consecutive increase, reaching 3.7%. This was a notable uptick from July's 3.2%, surpassing expectations of 3.6%. On a monthly basis, the consumer price index was up by 0.6%, marking its most substantial monthly increase since June 2022.
This spike was primarily fueled by a substantial 6% rise in gasoline prices. In a parallel trend, the producer price index also displayed robust growth in August, with a 0.7% increase, the highest level recorded since June 2022, outstripping market forecasts of a 0.4% uptick.
But another measure shows a downward trend
A different perspective emerges when volatile food and energy components are excluded from inflation calculations, an aspect closely monitored by the Federal Reserve. The core CPI experienced a slight decrease from 4.7% to 4.3% year-on-year, while the core PPI dropped to a year-on-year rate of 2.2%, reaching its lowest point since January 2021.
This favorable trend in core inflation contributed to the maintenance of positive market sentiment. Investors displayed a high level of confidence in the Federal Reserve's intention to retain current interest rates during the forthcoming meeting. Additionally, robust retail sales reports, indicative of strong consumer spending, further pushed back risks of a recession.
Stock watch: Tesla rallies
Tesla experienced a strong rally last week, marking one of the best performances in the S&P 500 index, following Morgan Stanley's upgrade of the electric vehicle giant to Overweight — signaling a belief that the stock price should improve — and a price target increase from $250 to $400 per share.
The chipmaker Qualcomm also made headlines with a significant performance, securing a deal to supply Apple with 5G modems for smartphones until 2026.
On a less-positive note, shares of Oracle pulled back as the company missed revenue estimates.Netflix downwardly revised its margin guidance.
The week also witnessed the highly anticipated debut of ARM Holdings PLC, Softbank's semiconductor firm, with the largest IPO of the year, valued at an impressive $54.5 billion.
Back to the strike
The United Auto Workers launched a strike early Friday against all three major Detroit automakers — Ford, Stellantis and General Motors. The strike followed unsuccessful negotiations concerning wage increases and other employee benefits. Negotiations were to continue over the weekend.