U.S. stocks closed near their session highs on Wednesday after July CPI data showed inflation is beginning to ease. The Dow jumped 1.6%, the S&P 500 gained rose 2.1% and the Nasdaq Composite jumped 2.9%. Melissa Brown, Managing Director of Applied Research at Qontigo, joins Cheddar News' Closing Bell to discuss.

Closing Bell

U.S. Stocks Close Near Session Highs After Data Shows Inflation Ease

let's turn back to the major indexes very strong day on Wall Street, all of the major indexes higher. The NASDAQ gaining nearly 3% and the stock's closing near their session highs? So joining me now is Melissa Brown, managing director of applied research at the investment management company Contigo Melissa. Thanks so much for coming on this show. How good is this inflation report for the long term trajectory of the stock market? Well, you know, I think as you said, it's still an 8.5% print. That's a pretty high number for inflation. It looks good on a relative basis compared to what we've had for the past few months. But it's still a pretty high number. And I think we would have to see prices just completely stabilize for several months, probably up to nine months in order to really get down to that 2% target that the Fed talks about interesting. We did get some other positive data points though for july after the stock market had bottoms, mid june, things did start to turn around. In july, investors were taking note July was the best month for the stock market since 2020. It was the job support, the inflation data that we got today as well as the services sector data that we got last week, which showed supply pressures, easing prices coming down, still a labor shortage. And actually new orders picking up as well that there was actually demand out there even as the supply chain does remain a little bit bumpy? What's your outlook for the economy melissa, do you think we can avoid a recession or are you still a bit wary? Well, I think that, you know what investors are telling us um is that we may not be able to completely avoid a recession recession, but given all of that good news that you just mentioned, hopefully even if if, you know technically we're in recession, it's going to be a soft landing and importantly employment is gonna stay strong um which, you know, she should help uh that that soft landing and then the subsequent recovery, do you think the Fed has paste these rate rises correctly? And what do you anticipate at its september meeting? Of course, will still have data from august that'll be coming in before the september meeting. But based on what we've seen so far, do you think half of a percentage point or even a 75 basis point hike might be appropriate in september um You know, as you say, well, we'll see what, what the numbers say. I think certainly if we're expecting that inflation is gonna stay at 8.5%. Um then that kind of an increase is certainly in the cards. You know, I think um you know, even the Fed would say now they were a little late to the game, they acted a little late um in, in starting to increase rates, you know, which maybe they should have done several months earlier, so they're a little behind the eight ball here. Um But if we are seeing the impact of what they're doing now and inflation starting to come down, um I think they're going to have to continue to act. But um you know, there does seem to be some speculation that for right now they need to increase rates, but even if we just hit a soft landing, they may at some point um let's say in 16, nine months need to start easing again. And I think that's one of the things that the markets are reacting to over the past few weeks. That would be a major boon for the stock market. It's so simple, right? I mean there's so many factors that impact the economy, but higher rates. Bad news for the stock market, lower rates, Good news. Clearly for the stock market as we talked for so long about that disconnect between Main Street And Wall Street, the first two years of the pandemic Melissa, we're still technically in earning season. We got some big reports coming in after the close, including Disney. What signals have you been picking up from corporate America about the health of their businesses and thus the s. p. 500 this earnings season? Well, I mean, you know, so far earnings have actually looked, good companies have been able to increase prices um to uh to so that they're not being horribly hurt by inflation. One of my concerns as a perpetual warrior is that they're not gonna be able to continue to do that um that you know, by next quarter. They may, you know, if inflation inflation is not gonna come down, you know immediately. And so so we may start to see some of that lingering impact next quarter. But at least for this quarter, it's been, you know, a pretty good earning season across the board. And certainly investors have liked that. Yeah, and we see the stock market again continuing to rally the S. And P. 500 closing at its highest level since early june. So certainly there are some things that are working right now in this economy. Melissa Brown, managing director of applied research at Contigo Melissa, Thank you so much for joining.