U.S. Inflation Slows: Market Support Ahead

This week, a series of U.S. economic data releases are scheduled, with strategists expecting them to ultimately provide support for the market.

The week began with the release of the January Consumer Price Index (CPI) on Wednesday, which showed a year-over-year decline of 0.1% in overall inflation and a 0.4% decrease in core inflation. This data suggests that the Federal Reserve is making progress towards its target of reducing the U.S. inflation rate to an annualized 2%.

On Thursday, the January Producer Price Index (PPI) data, which measures wholesale prices, was released. The PPI also showed a year-over-year decline of 0.1% in overall inflation and a 0.3% decrease in core inflation. Additionally, the weekly initial jobless claims data was released, showing a slight increase from the previous week.

Friday saw the release of the retail sales data, which showed a 3% increase in January compared to the previous month. This data suggests that consumer spending, which accounts for about two-thirds of U.S. economic activity, remains strong.

Sam Stovall, Chief Investment Strategist at independent research provider CFRA Research, stated that the impact of tariffs will only show up in future inflation data. He believes that if tariffs disrupt the supply chain after a period of time and lead to intensified inflation, then investors will become worried. However, for now, especially with Wednesday's CPI and Thursday's PPI data expected to show year-over-year declines in both overall and core figures, this will ultimately provide support for the market to continue its climb.