Tuesday's Close

E-mini S&P 500 Futures (September): Settled at 4430, up 4.25

E-mini Nasdaq-100 Futures (September): Settled at 15,040.50, down 80.75

Is inflation transitory? The debate is front and center, with U.S. CPI due at 7:30, am CT. Data for July is expected to increase but at a slower pace than the last three months. Still, inflation is expected to be the hottest in years, with used cars and airfares remaining a bellwether. Core CPI is watched most closely as it excludes the more volatile food and energy. Analysts estimate it to increase by 0.4% MoM, a rate not achieved before the pandemic since April 2005, and by 4.3% YoY, aside from last month’s 4.5%, this would be the hottest since 4.4% in January 2002. Headline CPI, not excluding food and energy, is expected at +5.3%.

This is a touch behind last month’s +5.4%, the hottest since +5.6% in August 2008. Last month, we noted that June’s read marked a steady trend higher in inflation that one cannot ignore. However, higher base numbers for July and August, given the economy reopening last year, would slow the pace of change. Regardless, these are still historically high expectations, and it paves the way for steadfast inflation into yearend. Considering all of this, a soft read today shall not change the Fed’s trajectory of announcing a taper as latest as the September policy meeting. Still, a hot read could speed up the next debate: the pace at which asset purchases are tapered.

The influential 2021 voter, Atlanta Fed President Bostic, speaks at 9:30 am CT. On Monday, he continued his move into hawkish territory, saying that one more strong jobs report is sufficient to begin tapering asset purchase. Kansas City Fed President George, a 2022 voter and a hawk, speaks at 11:00 am CT. Rounding out the day is a 10-year Treasury auction at noon CT. The yield of the 10-year has extended to 1.37% overnight, the highest since July 14th, ahead of both CPI and the auction.

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