Record-high stocks put to the test: data that will influence interest rates

Stocks worldwide are starting the week near record levels, with the S&P 500 and STOXX Europe 600 indices supported by a strong earnings season and stable investor risk appetite.

As the earnings season nears its end, management commentary indicates that demand is expanding beyond artificial intelligence-related sectors, supporting the assessment that profit recovery is spreading across more industries. Artificial intelligence remains a key structural growth engine, while improved activity in industrial, financial, and infrastructure sectors may broaden market participation beyond the narrow group of tech leaders.

Falling oil prices and improved goods flow through the Strait of Hormuz have reduced short-term inflationary pressure, though developments surrounding Iran remain in focus as markets assess whether energy risk premiums can fall further.

The week's main macroeconomic test is the US Consumer Price Index (CPI) release. Moderate data could ease pressure on long-term bond yields and support growth stocks, while an upside surprise might benefit value stocks, which feature stronger short-term cash flows.

Later this month, attention turns to the Jackson Hole central bankers' conference (August 27–29), where investors will seek clues regarding the Federal Reserve's response to economic developments. In summary, while the earnings season continues to support markets, inflation, oil prices, and bond yields will determine whether growth stocks maintain their lead or if markets shift toward value stocks.

USA: Inflation data in focus

Consumer and producer price data will be the week's primary economic focus. The path of monetary policy through year-end remains a subject of debate, and upcoming data could significantly impact all capital markets.

Consensus forecasts expect the Headline CPI, to be published Wednesday, to remain unchanged from the previous month at 3.5% annually. The Core CPI is expected to moderate slightly to 2.5% from 2.6%.

On Thursday, the Producer Price Index (PPI) will be released. The general index is forecast to moderate to 3.0% annually from 5.5%, while the core index is expected to fall to 4.7% from 4.9%.

Together, these reports should provide a clear indication of whether inflation is continuing its gradual decline or stabilizing at levels that might force the Federal Reserve to adopt a more restrictive policy. Retail sales, unemployment claims, consumer confidence, and housing market data will also be released, though they are expected to play a secondary role unless they provide significant surprises.