Dow Jones Industrial Average extends rebound after cool PPI inflation print

The Dow Jones added points on Thursday after better-than-expected June Retail Sales.
Equities continue to claw back near-term losses as investors shake off economic and political doldrums.
Consumer sentiment figures are in the barrel for Friday to round out a data-heavy week.

Joshua Gibson FXStreet

The Dow Jones Industrial Average (DJIA) extended a mid-week rebound on Thursday, tipping back into positive territory for the week as investors continue to brush off inflationary fears, tariff threats, and growing concerns that the Federal Reserve (Fed) could be poised to lose its political autonomy.

US Retail Sales data for June broadly came in above expectations, rising 0.6% MoM versus the previous month’s -0.9%. Rebounding Retail Sales bolstered investor confidence in conjunction with strong quarterly earnings released this week. Around 88% of earnings releases have exceeded Wall Street expectations.

Not-bad Retail Sales figures sparked a fresh lash out from President Donald Trump, aimed at Fed Chair Jerome Powell. Trump has ramped up his attacks on the Fed in recent weeks, culminating in Donald Trump signalling to Congress that he's prepared to remove Chair Powell from his position before Powell's term is over.

US labor data also came in better than expected, with weekly Initial Jobless Claims falling to 221K. Median market forecasts expected an uptick to 235K compared to the previous week’s 228K.

Rate cut hopes still hinge on inflation data

Consumer Price Index (CPI) inflation ticked higher earlier this week, sparking a fresh round of risk aversion and pushing investor hopes for Federal Reserve (Fed) rate cuts further down the calendar. Cooler-than-expected Producer Price Index (PPI) inflation assuaged investor fears of a resurgence in headline inflation pressures, and upbeat Retail Sales figures splashed further water on inflationary fires. However, rate markets are still reeling from a sharp readjustment in expectations. According to the CME’s FedWatch Tool, rate traders are still pricing in roughly even odds of a fresh rate trim in September, and around 40% odds of a follow-up cut before the end of the year.

Not all that glitters is gold

The devil is always in the details, and both PPI inflation data and Retail Sales numbers are no exception. The key stress point on inflation through 2025 is the Trump administration’s roughshod tariff strategy, and the PPI overwhelmingly excludes imported goods and materials from its calculations, meaning tariff-led inflation won’t show up in PPI results until its far too late to matter.

Headline Retail Sales are also calculated on an unadjusted basis, meaning monthly releases cannot differentiate between an actual uptick in consumer purchasing and increases in prices that consumers pay at the till. Real Retail Sales, which adjusts consumer purchasing volumes using the CPI, has remained essentially flat since reaching its latest peak in mid-2021.

Dow Jones price forecast

The Dow Jones continues to find technical support from the 44,000 major price handle, but bullish momentum remains sluggish. The major equity index is holding in bullish territory for the week, but just barely. The Dow remains down over 1% from its latest swing high above 44,800, and equity bulls are struggling to muscle the Dow Jones back into record highs north of 45,000.

Dow Jones daily chart

Economic Indicator

Producer Price Index (YoY)

The Producer Price Index released by the Bureau of Labor statistics, Department of Labor measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Changes in the PPI are widely followed as an indicator of commodity inflation. Generally speaking, a high reading is seen as positive (or bullish) for the USD, whereas a low reading is seen as negative (or bearish).

GBP/USD: Downward-sloping trendline near 1.3470 remains key barrier

The British pound faces selling pressure against its major currency peers, trading 0.1% lower at around 1.3420 against the US Dollar during the European trading session on Tuesday.

EUR/USD flatlines above 1.1500, awaits US jobs data

EUR/USD holds steady around 1.1505 in European trading hours on Tuesday. Markets remain cautious ahead of a slew of US jobs data, starting with the JOLTS Job Openings Survey later today. However, the downside appears capped by hot Eurozone inflation in July, bolstering the case for a European Central Bank rate hike at the next meeting.

Gold holds steady above $4,050; hawkish Fed bets favor bearish traders

Gold remains confined in a range below the $4,100 mark through the early European session as traders opt to wait for further developments surrounding the Middle East crisis. Meanwhile, the uncertainty over US-Iran peace talks continues to act as a tailwind for the safe-haven US Dollar.

Aave: Bearish RSI divergence risks a 20% drop despite steady DeFi deposits

Aave (AAVE) extends a mild near-term recovery on Tuesday, holding above its 50-day Exponential Moving Average at $90.80. Aave protocol’s V3 deployment on Monad blockchain recorded over $500 million in deposits over the last month, reflecting increased user adoption.

US JOLTs report in focus

In the US, the June JOLTs report will be in the spotlight. Job openings have increased modestly this year, which has historically predicted rising wage cost pressures ahead. June trade balance data will also be released in the afternoon and the preliminary reading pointed towards a stable trade deficit from May. The Fed's Schmid (non-voter, hawk) will be on the wires overnight.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.