cnbc.com/2022/08/05/inflation-takes-over-as-the-next-big-focus-for-markets-after-julys-monster-jobs-report.html
July's strong jobs report signaled the Federal Reserve may need to take an even tougher stance with interest rate hikes. Futures markets immediately priced in a higher, 0.75 percentage point hike for September. The surprise 528,000 increase in July payrolls announced Friday challenged the market view that economic weakness may force the Fed to pare back its rate hikes or even pause.

The consumer price index is reported Wednesday. The producer price index — a measure of wholesale prices — is due Thursday. Headline CPI, which includes energy and food, rose at a sizzling pace of 9.1% in June. The market had been expecting a half-point hike next month.

Core CPI, excluding energy and food, is expected to rise to 6.1% year-over-year. That figure is anticipated to be lower for July, at 8.7%, according to Dow Jones. Consumer sentiment is released Friday. It contains consumer inflation expectations, which are closely watched by the Fed.

"The Fed's neutral rate, the one that is neither restrictive nor accommodative, continues to be a moving target," said Arone. Fed Chairman Jerome Powell said after the last rate hike that the central bank was probably close to the neutral rate. That comment helped spur some investors to believe that the Fed could even cut rates next year.

"There was a bit of wishful thinking that the Fed was about to end rate hiking," said Richard Bernstein, chief investment officer of Richard Bernstein Advisors. "I think the mistake here is to go into long-duration growth stocks. I think that's the mistake," he said.
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