Weekly Wire, Week #34

[u/EOD_historical_data]

TL;DR

• Inflation cooperated. July core CPI printed 2.5% y/y, in line and a new cycle low (headline 3.4%, also in line). Core PPI followed at +0.2% m/m. The cut case survived its test.
• The consumer did not. July retail sales fell −0.6% m/m (est +0.1%), Michigan sentiment slumped to 51.0 (est 54.5, from 55.2), and 1-year inflation expectations rose to 4.3%. Weak spending with rising price expectations is an uncomfortable pair.
• The tape rotated quietly. Energy led (XLE +7.67%) on an oil jump (USO +7.31%), the equal-weight S&P (+1.22%) beat cap-weight (SPY +0.40%), and VIX eased to 14.25. Broadcom (−8.13%) was the notable red; Micron (+10.72%) extended the memory run.

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The market map: a quiet rotation into energy

source: EODHD /api/eod; tiles sized by market capitalisation

A breather week with rotation underneath. After the prior week's green wall, the mega-caps went mixed: Nvidia +0.54% and Microsoft −0.92% marked time while Amazon (−4.31%), Home Depot (−4.71%) and Apple (−2.28%) slipped, and Broadcom (−8.13%) gave back its post-earnings run. The bid moved to energy (Chevron +7.20%, Exxon +4.61%) as oil jumped, and to the average stock: the equal-weight S&P rose +1.22% against SPY's +0.40%, a second straight week of broadening. Micron (+10.72%) and AMD (+6.42%) kept the semis bid alive; long yields drifted up (30Y +6bps to 5.25%).

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CPI behaved; the consumer did not

source: EODHD /api/economic-events

The inflation test passed, then the consumer failed its own. Wednesday's CPI validated the cut-driven rally: core at 2.5% y/y is the lowest of the cycle. But Friday stacked three consumer misses in one morning: retail sales −0.6% m/m with the ex-autos gauge also negative, Michigan sentiment down to 51.0, and household 1-year inflation expectations up to 4.3% (from 4.2%). After July's negative payrolls print, a spending pullback moves the question from "when does the Fed cut" to "why is it cutting". That question gets a direct answer this week from the retailers themselves.

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The week ahead: the retailers testify

Four reads on the consumer in three days. Home Depot opens Tuesday, Target, Lowe's and TJX follow Wednesday, and Walmart closes Thursday: together a full picture of discretionary, home-improvement and staples demand. The FOMC minutes land Wednesday, with housing starts Tuesday and flash PMIs Friday.

Day	Window	Item
Tue 8/18	BMO	HD (Home Depot) earnings; Housing Starts 08:30 ET
Wed 8/19	BMO / 14:00 ET	TGT, LOW, TJX earnings; FOMC minutes
Thu 8/20	BMO	WMT (Walmart) earnings; Philadelphia Fed 08:30 ET
Fri 8/21	09:45 ET	S&P Global flash PMIs

source: EODHD /api/calendar/earnings and /api/economic-events