Good Morning Investors,
Stocks continue to defy gravity, with the S&P 500 ($SPY ( ▼ 0.44% )) edging up 0.1% on Monday to close just shy of record highs. The Nasdaq ($QQQ ( ▼ 0.29% )) gained 0.3% to set another fresh peak, and the Dow ($DIA ( ▼ 0.78% )) added 0.2%. Markets are now poised for a crucial day, with earnings season kicking into high gear and the highly anticipated June CPI report set to provide a pivotal read on inflation and the potential trajectory of Fed policy.
Opening Bell
U.S. equity futures point to a cautious but positive open, with S&P 500 futures up 0.3% and Nasdaq 100 futures rising 0.5%, driven by Nvidia’s ($NVDA ( ▲ 1.02% )) news. Dow futures are slightly lower, reflecting mixed bank earnings sentiment.
European shares are also higher, buoyed by hopes of tariff negotiations. In Asia, Japan’s Nikkei closed higher, supported by tech gains, while China’s markets finished flat amid mixed economic data and trade uncertainty. Oil prices eased modestly, and gold continued to gain on safe-haven demand.
Inflation in Focus: A Test for the Fed and Tariffs
At 8:30 a.m. ET, the June Consumer Price Index data will set the tone. Economists expect headline CPI to rise 0.3% month over month (up from 0.1% in May) and 2.7% year over year (versus 2.4% prior). Core CPI is forecast to accelerate to 0.3% month over month and 3.0% year over year.
The big question: are tariffs finally making their way into consumer prices? Economists and market strategists have long flagged a lag as inventories initially buffered tariff impacts. Now, with inventories depleted and new trade measures announced, these effects may start to emerge clearly. Goldman Sachs expects a moderate boost to core CPI from tariffs, especially in autos, apparel, and broad core goods, while services inflation remains more contained for now.
While the Fed uses PCE as its primary gauge, CPI remains a critical signal, especially with President Trump’s ongoing calls for lower rates and new criticisms aimed at Chair Jerome Powell. The latest White House push even includes questioning renovations at the Fed’s headquarters as potential grounds for Powell’s removal.
Markets still largely expect no change in rates at the upcoming meeting, but today’s data could shape expectations for a September cut.
A cut in September and December remains my base case at this point.
Earnings Season: Banks Lead, Tech and AI Dominate Headlines
Today marks the unofficial start to Q2 earnings season with results from JPMorgan ($JPM ( ▼ 0.45% )), Citi ($C ( ▼ 0.27% )), Wells Fargo ($WFC ( ▲ 1.38% )), BlackRock ($BLK ( ▼ 0.96% )), State Street ($STT ( ▼ 0.49% )), and Bank of New York Mellon ($BK ( ▲ 0.57% )). JPMorgan reported earnings of $5.24 per share on revenue of $45.68 billion, both topping estimates. Trading revenues surged 15%, supported by tariff-related market volatility, while investment banking fees climbed 7% on stronger deal activity. CEO Jamie Dimon highlighted the economy’s resilience but flagged persistent risks from trade, deficits, and elevated asset prices.
BlackRock surpassed $12 trillion in assets under management, the first firm ever to cross that threshold, though net inflows declined 9.8% amid fixed-income outflows. Its adjusted profit of $12.05 per share beat consensus but shares dipped in premarket as investors parsed fee declines and weaker flows.
Other banks echoed similar themes of strong trading offsetting mixed fee income and cautious loan growth, reflecting ongoing macro and policy uncertainty.
Big Tech and AI Infrastructure: Investment Ramps Up
Google announced a $25 billion investment plan to expand data center and AI infrastructure across the PJM grid region, including a $3 billion refurbishment of Pennsylvania hydropower facilities in partnership with Brookfield. The move underscores the escalating demand for power as AI infrastructure scales rapidly.
Separately, Nvidia confirmed it will soon resume sales of its H20 GPUs to China after receiving U.S. government assurances. This reversal, following recent meetings between Nvidia CEO Jensen Huang and President Trump, strengthens Nvidia’s position in the critical Chinese market and alleviates near-term revenue concerns. The company also announced a new "fully compliant" RTX PRO GPU tailored for smart factories and logistics.
Anthropic unveiled Claude tools for financial services, integrating real-time data from providers like S&P Global and Databricks. The company aims to further penetrate enterprise markets, with its solutions now available on AWS Marketplace and soon on Google Cloud.
Tariffs and Trade Dynamics: Market Learning Curve
President Trump’s recent escalation in tariffs, including new 30% duties on EU and Mexican goods starting August 1, is shaping both inflation expectations and corporate strategies. While initial market responses have been muted compared to April’s “Liberation Day” volatility, today’s CPI data could mark a turning point in understanding the real consumer impact.
On the policy front, the EU and South Korea are negotiating with the U.S. to soften tariff impacts, while Trump maintains his hardline stance. These negotiations are critical for sectors like autos and industrials, which face higher exposure.
Analyst Recommendations
Ally Financial: RBC raises target to $45 from $40, citing strong net interest margin potential.
American Express: RBC boosts target to $360 from $310, on the back of robust guidance.
Bread Financial: RBC raises to $65 from $52, supported by product expansion and new partnerships.
Capital One: RBC increases target to $240 from $190, driven by strong balance sheet growth and buybacks.
Delta Air Lines: Jefferies raises to $62 from $56, supported by optimized scheduling and route management.
Key Economic Events Today (U.S. ET)
8:30 a.m.: June CPI (expected +0.3% MoM headline, +3.0% YoY core)
8:30 a.m.: NY Fed Empire State Manufacturing Index (expected -9.25)
11:00 a.m.: Cleveland Fed CPI report
Final Thoughts: Navigating Complexity with Discipline
The convergence of critical inflation data, the first major earnings from banks, and evolving tariff dynamics make today a pivotal day for investors. Markets are contending with policy uncertainty, rising input costs, and shifting global trade flows. Yet, beneath this, strong corporate fundamentals and resilient consumer dynamics provide support.
The focus must remain on data rather than headlines. The strength in AI-driven sectors, robust trading revenues, and strategic infrastructure investments all reflect a market capable of navigating through noise. As always, discipline and patience remain central to capturing opportunities amid volatility.
Please feel free to reach out if you'd like help interpreting today’s data or positioning in this environment.
Dan Sheehan
This newsletter is for informational purposes only and should not be considered investment advice. Please consult your financial advisor about your specific situation.