Here are the 2 big things we're watching in the stock market in the week ahead
Inflation data for July takes center stage in the week ahead, as second-quarter earnings season winds down. Another factor that could influence the market action: updates on the Iran war. Though Treasury Secretary Scott Bessent said early last week that a deal may be coming , that news never materialized. That’s not to say a deal won’t happen, but the market is likely going to need some further confirmation that progress is being made in order to sustain its Bessent-fueled optimism . Now, let’s preview the big economic reports of the week and the lone Club earnings release from Cardinal Health . 1. Inflation data: The consumer price index (CPI) and producer price index (PPI) reports for July are due out Wednesday and Thursday, respectively. The CPI represents what consumers pay and is therefore a higher priority for the Federal Reserve. But the PPI measures the prices that producers receive for their goods at several stages in the supply chain. As a result, whereas the CPI is considered a lagging indicator, the PPI is considered a leading indicator because if companies are paying more for their inputs, they may look to pass those higher costs down the road. Those higher prices for consumers would, eventually, show up in the CPI. As of Friday, economists are looking for a 3.4% and 2.5% year-over-year gain for the headline and core CPI, respectively, according to FactSet. The core index removes volatile energy and food prices. For the wholesale PPI, economists are expecting a 0.1% month-over-month gain at the headline level, and a 0.3% monthly gain at the core level. Much of the conversation around this year’s rekindled inflation has been about the war-driven rise in energy prices, which makes sense given it’s a major input cost across economic sectors. But we also cannot ignore other potential drivers that may prove more durable than the spike in oil prices. One such source of inflationary pressure: the AI data center buildout. Indeed, Fed Governor Lisa Cook spoke about this at The Exchequer Club of Washington in July. In addition to calling out the Iran war and its resulting impact on energy prices, she noted the AI capex cycle “has caused significant price increases for chips, other high-tech equipment, software, and utilities.” Of course, those are only a fewer examples. These data centers also require a ton of copper (a common building material for other projects), gobble up an insane amount of energy (at a time when supply is under pressure), and lead to tons of jobs (which is fantastic, but we have to be mindful that more folks at work and wage gains are inflationary as more dollars are available to chase the same goods). As a result of the combination of these two forces, Cook said, “I see a notable shift in the balance of risks relative to a year or so ago, with inflation risks now outweighing employment risks.” Cook reiterated view that in a separate speech on Wednesday, adding she was “prepared to act, if necessary,” on a rate hike to address inflation. Cook’s acknowledgement that the AI buildout is inflationary is important because it means that the Federal Reserve cannot look only at the developments in the Middle East — and subsequent reaction in the price of oil — as indicators of how to adjust monetary policy. Put another way, with inflation still tracking above the central bank’s 2% target rate, a break in the price of oil may not be enough to get inflation back down to target given expectations for the AI buildout to continue on for at least another year (and we’re already seeing signs it will last well into 2028). To be sure, Friday’s disappointing July nonfarm payrolls numbers — a loss of 23,000 when the Dow Jones consensus called for a gain of 83,000, and softer-than-expected wage inflation — could cause the Fed to stay on hold in September, even as unemployment ticked lower to 4.1%. The latter was partly a function of a lower participation rate, which fell to a multiyear low of 61.4%. Additionally, as our colleague Michael Santoli has noted , there are dueling views within the Fed on how to think about the AI capex cycle. While few would argue that the build-out is not inflationary, Fed Chair Kevin Warsh has argued that once AI proliferation starts to ramp, it will actually help to keep inflation low as a result of the productivity growth it will bring. The bottom line is that next week’s CPI and PPI reports are important because they give us insight into the state of inflation at the moment. However, they are nonetheless backward-looking, and it’s clear that the Warsh-led Fed is looking beyond the traditional metrics these days, attempting to figure out where the puck is going as a result of everything, including the AI data center buildout. Consequently, the impact these reports have on the market going forward may be a bit different than it has had in the past. That’s because game of trying to figure out what the Fed will do, based on macroeconomic data releases, has changed. The other two notable updates this week are the existing home sales report out Tuesday, and the retail sales report out Friday. Both are for July. Of the two, the retail sales report likely carries more weight because it shows where the consumer is spending and if they’re spending more or less than the month prior — in other words, are we still seeing resilience in the face of rising prices? It’s not that the existing home sales report isn’t important, particularly for Home Depot shareholders like ourselves. It’s just not likely to be as market-moving because the issues plaguing the housing market are a lack of supply and high interest rates, which make monthly payments unaffordable for many looking to purchase their first home. Until we see progress on one of these two fronts (ideally both), investors just aren’t going to extrapolate the data from a good report that far into the future. 2. Earnings: The only Club name reporting this week is Cardinal Health , which is hovering within 1.5% of its all-time high. Cardinal is a behind-the-scenes healthcare giant, distributing drugs and medical supplies to hospitals and pharmacies. But crucially, it’s also been pushing into more-profitable ventures, such as specialty pharmaceuticals, direct-to-patient home delivery, and acquiring the business side of medical practices. Cardinal’s two main peers, Cencora and McKesson , reported last week. Both beat on the top and bottom lines, and hiked their full-year earnings guidance. On Tuesday morning, we want to see Cardinal get back into the business of delivering clean beats after revenue missed expectations last quarter. This will be Cardinal’s fiscal 2026 fourth quarter report, so where fiscal 2027 guidance is established figures to influence the market reaction. One of the common themes from both Cencora and McKesson was strength in their specialty businesses, which covers things like cancer and urology treatments. We’ll be looking at how Cardinal’s performance stacked up there. The growth of GLP-1s made by Club name Eli Lilly and Novo Nordisk is driving shipment volumes for drug distributors, but they’re not big profit drivers for Cardinal. Lilly’s earnings last week made clear GLP-1s are still booming. But something else Lilly said piqued our interest ahead of Cardinal’s report: momentum for its Alzheimer’s drug Kisunla, helped by increases in diagnostic testing for the brain-robbing disease. Cardinal’s nuclear medicine unit is involved here as a maker and distributor of Vizamyl, which is GE Healthcare’s diagnostic agent for Alzheimer’s used during PET scans. GE Healthcare saw double-digit revenue growth for Vizamyl in the June quarter. Cardinal has in recent years invested to ramp production of Vizamyl and other radio diagnostics to detect cancer and coronary artery disease. This is also one of those more-profitable focus areas. Against this backdrop, we’ll pay close attention to any commentary around the performance of Cardinal’s nuclear medicine business. Finally, two home-health acquisitions that Cardinal made in July could be a topic of conversation on Tuesday’s earnings call. Here’s the LSEG consensus for the top and bottom lines: Revenue: $65.03 billion EPS: $2.42 Week ahead Monday, Aug. 10 Before the bell: Berkshire Hathaway (BRK), Barrick Mining (B), Ferguson (FERG), Dole (DOLE) After the bell: Simon Property Group (SPG), AECOM (ACM), Alcon (ALC) Tuesday, Aug. 11 Existing home sales at 10 a.m. ET Before the bell: Cardinal Health (CAH) , Sea Ltd (SE), On Holding (ONON), Amentum (AMTM), Aramark (ARMK), Elbit (ESLT) After the bell: Supermicro (SMCI), CoreWeave (CRWV), Lumentum (LITE), H & R Block (HR) Wednesday, Aug. 12 July CPI report at 8:30 a.m. ET Before the bell: Nebius (NBIS), Arcos (ARCO), Brinker (EAT) After the bell: Coherent (COHR), Cisco (CSCO), Infleqtion (INFQ), Cerebras (CBRS) Thursday, Aug. 13 July PPI report at 8:30 a.m. ET Initial jobless claims at 8:30 a.m. ET Before the bell: Tapestry (TPR), JD.com (JD), Bullish (BLSH), After the bell: Applied Materials (AMAT), Credicorp (BAP), Friday, Aug. 14 Retail sales report at 8:30 a.m. ET No earnings report of note (Jim Cramer’s Charitable Trust is long HD and CAH. 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