Stocks had a strong showing Tuesday after the latest U.S. wholesale inflation report came out. Still, investors should tread lightly, according to Evercore ISI. The Wall Street research firm cautioned Tuesday that the monthly producer price index readings have little correlation to the more widely followed consumer price index — which can sway the stock market much more. The PPI reading for July showed a 0.1% increase, less than economists expected. In other words, just because PPI rose less than expected, it doesn’t mean investors should expect a tame CPI report on Wednesday. Stephen Stanley at Santander U.S. echoed that sentiment. “Financial markets seem to react too much every month to PPI,” said Stanley, the bank’s chief economist. ” [It] has limited implications for CPI, [which] is far more important.” That said, if the July CPI data out Wednesday adds credence to expectations of the Federal Reserve cutting rates next month, it would likely give equities another boost. The S & P 500 closed Tuesday’s session nearly 2% higher, while the Nasdaq Composite climbed 2.4%. The Dow Jones Industrial Average advanced more than 408 points, or 1.04%. The major averages are now well above the lows seen in Aug. 5, when the Dow and S & P 500 suffered their biggest one-day pullbacks since 2022. .SPX 5D mountain 5-day chart “When you think about the pullback, you really just had normal August seasonality coupled with a ‘Black Swan’ event,” TradeStation global head of market strategy David Russell said Tuesday, referencing the weak July nonfarm payrolls report that helped spark a global market sell-off early last week. “The data is not yet bad enough to be passing through to earnings. … We’re still looking at double digit earnings growth.”
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