US futures remain relatively unchanged heading into Tuesday’s session as the recent rally in oil keeps the inflation debate alive ahead of Wednesday’s CPI report.
Oil matters because it feeds directly back into the monetary policy debate following Friday’s surprisingly weak jobs report.
The US economy lost 23,000 jobs in July against expectations for a gain of around 80,000, while the unemployment rate eased to 4.1% as labour-force participation declined. The initial reaction was a sharp reduction in expectations for a near-term Fed hike, pushing Treasury yields lower and supporting equities.
The rebound in oil this week has partially reversed some of that relief. Treasury yields have moved higher again as investors weigh weaker employment against renewed inflation pressure, leaving Wednesday’s CPI print with even greater importance.
Tomorrow’s inflation report is therefore the main catalyst for the week. Producer prices and a series of Treasury auctions follow, but with monetary policy expectations finely balanced, the incoming data will do much of the talking.
Earnings also remain on the radar. CoreWeave reports tonight, with Cisco and Applied Materials following later this week, providing another read on whether the huge investment going into AI infrastructure continues to translate into demand and revenue growth.
From a technical perspective, the S&P 500 remains in an intact uptrend, currently consolidating close to its latest record high. Chart pattern enthusiasts will also see the formation of a potential bull flag, a continuation pattern that, if confirmed by a breakout, could open the door to further record highs. For now, this still looks very much like a temporary breather following last week’s strong run rather than the beginning of a broader correction.
However, monetary policy expectations and bond yields remain important indicators. A sustained shift back towards tighter policy would put further pressure on AI-linked growth stocks and could begin to weigh more heavily on the wider index.
From a portfolio perspective, we remain flat on oil due to the lack of clear trend direction and the continued volatility in price action, keeping our focus on the strongest stocks in the strongest sectors. Any volatility created by the inflation data will be used to assess opportunities in trends that are already working rather than chase areas of the market still struggling to establish leadership.
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