The S&P 500 and tech-heavy Nasdaq are poised to post their longest week of weekly gains since November, bolstered by Wednesday's inflation data.
One strategist thinks markets aren't out of the woods just yet when it comes to inflation and any subsequent actions from the Federal ReserveFederal Reserve.
The market really took the July CPI Consumer Price Index report as the evidence that one data point does not make a trend, PNC Asset Management Chief Investment Officer Amanda Agati told Yahoo Finance Live on Friday. The consumer price index climbed 8.5% from a year ago in July compared to the 9.1% annual increase in June, according to data released Wednesday. Economists had predicted that July's data would show an 8.7% jump from the previous year.
Prices were the same from June to July on a month-over-month basis.
The Fed may be able to slow down its pace of interest rate hikes because of this report. The CME Group data shows markets are pricing in a 55% chance that the Fed will raise rates by 0.50% next month, after raising its benchmark interest rate by 0.75% in June and July.
This week's data isn't sure what the next policy steps will be from the Fed, and Agati isn't sure what that will be.
The market has rallied a lot assuming that the Fed's forward guidance and terminal rate assigned by the current dot plot is where policy is going to end, though that may be the case that inflation has peaked Again. The Fed's dot plot suggested that benchmark interest rates would hit a range of 3.5% -- 3.75% by the end of next year. The Fed's benchmark interest rate range is currently at 2.25% -- 2.5%.
The central bank has been raising rates in an effort to slow the economy and bring inflation back to its 2% goal.
Agati said we need more data points to confirm that officially the peak for inflation is in. Over the next couple of months, we can certainly get confirmation that the CPI continues to move in the right direction, but we don't have confirmation from the Fed and Fed governors that the guidance they have laid out is really it. I think the Fed is very fixated on needing to do more, and that's a very vague term.