The Dollar Cools but the Likelihood of a UAW Strike Heats Up
Plus, August inflation data is on tap for later this week as Apple prepares to unveil its new iPhone and earnings from Adobe and Oracle await.
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* The dollar trades off, lifting equity stock futures
* August CPI, PPI and Retail Sales this week
* Probability of a UAW strike rises
* Company events are more than just Apple's this week
* More investor conferences to parse, Senate AI Forum and Arm's IPO
Stock futures point to a positive start to what will prove to be a rather busy week. Spurring futures higher is the decline in the dollar, which as we shared with you last week has been on a tear of late. Helping soften the dollar are weekend comments from Treasury Secretary Janet Yellen that she's increasingly confident the US will be able to contain inflation without major damage to the job market.
With the Fed in a blackout period ahead of the Federal Open Market Committee (FOMC) meeting scheduled for Sept. 19-20, odds are the market will put a greater focus on the data coming later this week. The Wall Street Journal reported over the weekend there is a consensus among Fed members not to raise rates when the central bank meets next week. As we know, however, recent data and higher energy prices have renewed concerns about the fed funds rate potentially moving even higher in the coming months. We also know we will have several rounds of additional data before the Fed announces its Nov. 1 policy decision. Barring further and sustained progress across a number of inflation indicators, we likely continue to face a Groundhog Day-like mentality about fed policy between now and year-end.
Today's economic calendar is empty but we quickly will kick into gear later this week with August inflation data and retail sales figures. And with less than a trickle of earnings today, the market likely will focus on the next wave of investor conferences that begin today and Apple's AAPL iPhone event tomorrow. We will look to glean updates on the current quarter and expected earnings for the S&P 500 as we move toward the quarter's close in 15 trading days and soon after we begin the September quarter earnings season.
This week's economic data
The data to watch this week includes the August Consumer Price Index (CPI) and Producer Price Index (PPI) reports, and we expect both will be put under the microscope. Expectations call for a slightly lower core CPI print for August, so a hotter print is likely to spook the market. Given what we saw in the August ISM Non-Manufacturing Index's price component as well as the recent move in oil and gas prices, which are now above year-ago levels per AAA, we're keeping our inverse ETFs in play leading into that data. August Import/Export prices will add another dimension for inflation as well.
The August Retail Sales report will be compared against the 3.2% year-over-year increase posted in July. Heading into that report, let's remember sequential comparisons are likely to be impacted by the July data benefitting from Amazon's AMZN 2023 Prime Day as well as competing efforts by others, including Walmart WMT , Target TGT and Best Buy BBY . The preceding will keep us focused on year-over-year looks at the data., which should be positive for our shares of Amazon, Costco COST , Chipotle Mexican Grill CMG , McDonald's MCD and Mastercard MA .
Probability of a UAW strike rises
Also on our radar is the potential United Auto Workers strike. The probability of a strike of US automakers continued to increase after the UAW rejected separate contract offers from General Motors GM , Ford Motor F and Stellantis STLA . Estimates by the Anderson Economic Group have a 10-day work stoppage impacting US GDP by $5.6 billion.
We see the odds of a strike as better than 50/50 at this point, and if it comes to pass it could be another factor that in the short term does the Fed's job for it -- that is, cooling the economy. However, a strike could lead to higher used-car prices, something that tends to influence CPI data.
Earnings and company events
As we noted above, quarterly earnings slow to a mere trickle this week, but make no mistake the market will be hanging on what Oracle ORCL and Adobe ADBE have to say about enterprise spending, cloud and, of course, AI.
Tuesday will see Apple's "Wanderlust" event that will unveil the latest generation of iPhones, but no word yet what the "one more thing" will be. This week will also see investor days from LabCorp LH and Yum China YUMC as well as Nike's NKE annual shareholder meeting. With those last two, we'll be keenly interested in what is said about China's economy and its consumers.
Investor conferences
Much like last week, there will be several investor conferences that will see companies discussing their businesses and competitive positions. Investors will be mining these presentations for insight into the current quarter:
*Piper Sandler Growth Frontiers Conference
*Morgan Stanley 21st Annual Global Healthcare Conference
*Barclay's 21st Global Financial Services Conference
*Goldman Sachs 30th Annual Global Retail Conference
*Baird Global Healthcare Conference
*UBS Global Energy Transition Conference
*BofA Securities Media, Communications and Entertainment Conference
Senate AI Insight Forum
We also have the Senate's first AI Insight Forum with expected participants to include OpenAI CEO Sam Altman, Nvidia NVDA CEO Jensen Huang, IBM IBM CEO Arvind Krishna, Microsoft MSFT CEO Satya Nadella, Microsoft co-founder Bill Gates, Meta Platforms META CEO Mark Zuckerberg and Tesla TSLA CEO Elon Musk.
Arm IPO
And if that wasn't enough, chip designer Arm ARM is expected to price its initial public offering and start trading in the coming days. Reports indicate the transaction is more than five times oversubscribed, which suggests we are likely to see the price talk for the offering be revised higher.
At the time of publication, Action Alerts PLUS was long AAPL, AMZN, COST, CMG, MCD, MA, F and MSFT.