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Wall Street Braces for Quiet Week as Investors Eye Macro Data and Fed Next Move

 
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Key Highlights:

 
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PCE index shows positive progress on inflation, potentially bringing Fed closer to rate cuts
 
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Trump's rising election chances may impact various sectors, including green energy and cryptocurrencies
 
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NVIDIA stock recovers after volatile week, with analysts remaining bullish long-term
 
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Upcoming U.S. employment report could significantly influence Fed's September rate decision
 

Inflation Eases: PCE Index Signals Potential Rate Cut on the Horizon

 

The Personal Consumer Price Index (PCE) remained nearly unchanged in May, aligning with expectations and reducing the year-over-year increase to 2.6% from April's 2.7%. This positive development on the inflation front may bring the Federal Reserve closer to considering interest rate cuts, following consistent 0.3% increases in the preceding months.

 

The moderate monthly figure comes as no surprise, especially in light of the recent Consumer Price Index (CPI) data, which also indicated price stability. When delving deeper into the numbers, the annual inflation rate stands at a promising 2.563%, tantalizingly close to the 2.5% threshold that could further bolster the case for monetary policy easing.

 

Political Landscape Shifts: Trump's Rising Prospects and Market Implications

 

Recent political developments suggest Donald Trump has emerged as a frontrunner in the presidential race, potentially impacting various market sectors. While the green energy sector may face headwinds, other areas could see benefits from a potential Trump presidency.

 

Oktay Cabrek of Leverage Shares notes, "In light of Trump's positive attitude towards cryptocurrencies, we believe that a clear advantage in the polls in favor of Trump will benefit Bitcoin, the dollar and stocks, at least in the short term." However, Cabrek also cautions that Trump's stance on protective tariffs, immigration, and his tendency to pressure the Federal Reserve could raise concerns in the long run.

 

NVIDIA: Volatility Persists, but Long-Term Outlook Remains Bullish

 

NVIDIA's stock experienced a rollercoaster week, shedding market value equivalent to Walmart before rebounding. Despite short-term fluctuations, analysts maintain a bullish long-term outlook on the stock, citing strong fundamentals and sentiment.

 

"Against the background of the high growth in the company's revenues, Nvidia's earnings multiple is actually lower now than the levels in mid-2023."

 

Cabrek explains, "Against the background of the high growth in the company's revenues, Nvidia's earnings multiple is actually lower now than the levels in mid-2023." However, potential risks include a decrease in global AI investment and escalating geopolitical tensions between China and Taiwan.

 

Labor Market Data: A Critical Factor for Fed's September Decision

 

Investors should keep a close eye on the upcoming U.S. employment report, expected to be released on Friday. The consensus forecast points to an increase of 180,000 new jobs in June. However, Cabrek warns that a figure below 100,000, coupled with unemployment remaining above 4%, could signal economic weakness while increasing the likelihood of a Fed rate cut in September.

 

Conversely, if the strong trend from May persists, the probability of a rate cut could diminish significantly. Currently, the market is pricing in less than a 60% chance of a September rate cut, underscoring the importance of this week's labor market data for investors looking to position themselves ahead of potential policy shifts.

 

As the quiet summer trading period approaches, investors would do well to closely monitor these key economic indicators and political developments. While the week may be light on corporate earnings, the macro landscape continues to evolve, presenting both opportunities and risks across various sectors.

 
 
 

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Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.

 
 
 
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