A soft inflation reading in the week ahead after Friday’s jobs report could be the signal stocks need to turn around after their recent carnage from rising bond yields. Stocks initially sold off Friday after September’s blockbuster payrolls numbers signaled the Federal Reserve has further to go in its fight against inflation. By mid-morning, however, the major averages rebounded as investors digested wage growth that came in softer than expected. At session highs, the Dow Jones Industrial Average rallied 350 points, or 1.1%. Earlier in the session, it was down by as much as 272 points, or 0.8%. Those moves helped the major averages curb losses from earlier in the week. Some market participants are hopeful stocks can start to rebound from their recent lows if next week’s inflation reports confirm price pressures easing. The producer price index comes out Wednesday, while the consumer price index is due out Thursday. “I’m very bullish right now,” Jim Lebenthal of Cerity Partners said Friday on CNBC’s ” Halftime Report .” “Once we get the CPI, PPI, if those numbers come out good, then we’re going to stop talking about the Fed.” “We’re going to focus on what the economic drivers are for this economy,” Lebenthal added. “And those economic drivers are likely to favor the cyclicals going forward.” A tough start to October Investors are wrapping up a volatile start to October. Earlier this week, the U.S. 10-year Treasury yield hit a 16-year high, causing the 30-stock Dow to dip into negative territory for the year. On Tuesday, the index also notched its worst trading day since March. But some traders are hopeful that stocks will soon start to bounce off oversold conditions. The September consumer price index that’s due out Thursday is expected to show easing inflation. Economists polled by Dow Jones anticipate inflation rose by 0.3% from the prior month, and by 3.6% on a yearly basis. That would be a cooler print from the previous month, when inflation gained 0.6% and 3.7%, respectively. Meanwhile, so-called core CPI, which excludes volatile food and energy prices, is expected to have risen 0.3% month over month, in line with the prior month, according to consensus estimates. Year over year, it’s set to have risen 4.1%, also slightly cooler. A consensus reading could mean the Fed will not have to raise rates again at its November meeting. That’s an outcome investors are already hopeful for after San Francisco Fed President Mary Daly said the need for further Fed tightening has diminished . “A stronger economy and resilient labor force likely drives revenue and earnings growth. So, I suspect that the third-quarter earnings reporting season will be a positive catalyst, not a negative one, and we’ll likely see guidance for the fourth quarter tick up, not down,” said Art Hogan, chief market strategist at B. Riley Financial. “This may be the week that we’re able to break this hand-in-glove relationship where rising yields mean falling stocks,” Hogan said. Next week is also the start of the third-quarter earnings season, kicked off by major banks JPMorgan Chase , Wells Fargo and Citigroup on Friday. BlackRock also reports, as does Dow member UnitedHealth Group . Week ahead calendar All times ET. Monday, Oct. 9 No notable data or earnings Tuesday, Oct. 10 6 a.m. NFIB Small Business Index (September) 10 a.m. Wholesale Inventories final (August) Earnings: PepsiCo Wednesday, Oct. 11 8:30 a.m. Producer Price Index (September) 2 p.m. FOMC Minutes Thursday, Oct. 12 8:30 a.m. Consumer Price Index (September) 8:30 a.m. Continuing Jobless Claims (9/30) 8:30 a.m. Hourly Earnings final (September) 8:30 a.m. Average Workweek final (September) 8:30 a.m. Initial Claims (10/07) 2 p.m. Treasury Budget (September) Earnings: Domino’s Pizza , Delta Air Lines , Fastenal , Walgreens Boots Alliance Friday, Oct. 13 8:30 a.m. Export Price Index (September) 10 a.m. Michigan Sentiment preliminary (October) Earnings: BlackRock , UnitedHealth Group , The PNC Financial Services Group , JPMorgan Chase , W ells Fargo , Citigroup
This story originally appeared on CNBC
