The coming week will feature several key U.S. economic data releases that could significantly influence market sentiment and introduce volatility to the market, which is currently trading near record highs.
These announcements include the Consumer Price Index (CPI) on Tuesday, August 12; the Producer Price Index (PPI) and initial jobless claims on Thursday, August 14; and retail sales along with the University of Michigan Consumer Sentiment Index on Friday, August 15. While consensus estimates anticipate moderate inflation, stable employment, and resilient consumer activity, any deviations could heighten risks by altering perceptions of inflation trajectories, economic growth, and Federal Reserve policy, potentially prompting sell-offs and downward pressure on equity valuations.
Key Economic Indicators to Watch:
- Consumer Price Index (CPI) – August 12, 2025 (8:30 a.m. ET)
The July CPI report is expected to show a headline monthly increase of 0.2% (down from 0.3% in June) and a core monthly rise of 0.3% (up from 0.2%). This indicator is a primary gauge of inflation. An upside surprise in inflation could signal persistent price pressures, potentially reducing the likelihood of Federal Reserve rate cuts and leading to higher bond yields, which would compress valuations for growth-oriented stocks. Conversely, a significantly lower-than-expected reading could raise concerns about economic weakness. - Producer Price Index (PPI) – August 14, 2025 (8:30 a.m. ET)
The July PPI is forecasted to reflect a headline monthly gain of 0.2% (from 0.0% in June) and a core increase of 0.2% (also from 0.0%). PPI provides insights into upstream inflationary pressures. An unexpectedly elevated PPI could amplify inflation fears, reinforcing a hawkish Federal Reserve stance and potentially delaying monetary easing. This could trigger profit-taking, particularly in cyclical industries. A softer-than-anticipated PPI might ease these concerns but could also highlight weakening demand. - Initial Jobless Claims – August 14, 2025 (8:30 a.m. ET)
For the week ending August 9, claims are estimated at 220,000, down from the prior week’s 226,000. This metric offers timely insights into labor market dynamics. An increase beyond forecasts could indicate softening employment conditions, heightening recession risks and potentially catalyzing broad-based selling in a market at all-time highs. A lower figure would reinforce stability but could indirectly fuel inflation concerns if paired with other strong data. - Retail Sales – August 15, 2025 (8:30 a.m. ET)
The July retail sales data is forecasted to grow by 0.5% month-over-month (slightly below June’s 0.6%). This report tracks consumer spending on goods. Risks emerge if sales underperform, indicating a slowdown in consumer activity and potentially fueling recession anxieties, which could lead to declines in consumer discretionary and retail stocks. While stronger sales might bolster growth narratives, an excessively robust reading could stoke inflation worries. - University of Michigan Consumer Sentiment Index – August 15, 2025 (10:00 a.m. ET)
The preliminary August reading is projected at 62.1, a modest improvement from July’s 61.7. This survey assesses consumer attitudes and inflation expectations. A lower-than-expected sentiment score could undermine market confidence by signaling reduced willingness for future spending, amplifying fears of an economic contraction, especially in sectors reliant on discretionary purchases. Higher inflation expectations within the report could compound CPI/PPI risks.
In aggregate, these releases could jeopardize stock market record highs by introducing uncertainty around the Federal Reserve’s September decisions and the broader economic outlook. Upside inflation surprises or signs of weakening demand and employment might disrupt the prevailing narrative of controlled disinflation and resilient growth, leading to heightened volatility and potential corrections. Investors should monitor these indicators closely, as consensus-aligned results may sustain upward momentum, while deviations could prompt risk-off behavior.
The VIX index, meanwhile, closed Friday at 15.15, below the 1-year mean of ~19, and only a couple of percent higher than the 12.8, holiday-impacted lows of December 2024. Put differently, buying some insurance through September is very reasonably priced. This is important for another reason. The market is broadly anticipating that the Fed will cut rates at the September FOMC, so the risk to markets now is that the Fed does NOT cut rates.
September expiration is 52 calendar days away (as I write this). Over the past century, the average return for the S&P 500 was ~ 1%, and the market has been higher about 62% of the time. Based on the earnings results we’ve seen since July 1st, corporate revenues and profits have generally been quite good, better than average even. However, when the market has declined, it has done so by an average of ~5%. That would bring SPY, the ETF that tracks the S&P 500, down to ~$605.
At the moment, a SPY September 30th 637/605 put spread costs about $6.25, or less than 1% of the current stock price.
