Key Takeaways
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Q2 earnings have been stellar, while July inflation data was just what the doves ordered
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Retailer results hit this week, and NVIDIA reports next Wednesday, offering fresh clues on consumer strength and the AI boom
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Then comes Jackson Hole, with Fed Chair Kevin Warsh’s first major speech adding another potential volatility catalyst before Labor Day
It has been a banner Q2 earnings season. Retailers report this week, with NVIDIA (NVDA) as the headliner over August’s final full week. A whopping 50% bottom-line EPS growth rate is expected, something we’d normally see only coming out of a steep profit recession. AI capex, gains on equity securities (the so-called "other income”), and a dash of tariff refunds all helped fuel April through June EPS for firms big and small, at home and abroad.
Multinational corporations also lapped 2025’s “Liberation Day,” modestly aiding this year’s gains, too. Higher oil prices for the Energy sector, World Cup spending for some consumer stocks... the list goes on and on.
The Big Question
We mentioned last week that a question posed at upcoming corporate events may be “what if this is as good as it gets?” If that’s the biggest worry, I’d say we are faring well. The latest string of economic data, in fact, prompted chatter of Goldilocks, given easing inflation, stunning earnings growth, and, as Bank of America found, a converging of the K-shaped economy. Its credit and debit card data point to strong lower-income spending growth just as their real disposable income ticked up.
So, there’s some good news at the household level. And, per Econoday, recent inflation data was likewise encouraging. July CPI rose just 0.1% last month, matching consensus, bringing the annual rate to 3.4%. Core CPI, which strips out food and energy, increased by 0.2%. Over the previous 12 months, core CPI verified at 2.5%, matching January and February for the lowest since March 2021. Following the data release, implied odds of a September Fed rate hike eased.
July CPI: A Continued Inflation Cooldown
Source: Econoday
See more: Key Takeaways From Second Quarter Earnings Season So Far
PPI Adds to the Dovish Case
Those odds fell further after last Thursday’s PPI report. Wholesale prices were flat in July (actually slightly negative out a few decimal places). A significant 0.7% drop in goods prices offset higher costs for services and construction, says Econoday. The PPI is still up 4.7% from a year ago, though, and the worry is that elevated prices upstream will eventually trickle down to the consumer. Core PPI (PPI ex food, energy, and trade) rose 0.4%, which is still an irksome figure for inflation watchers.
Toss it all in the macro blender, and Wall Street economists predict a 0.22% uptick in the core PCE Price Index, the Fed’s preferred inflation gauge. While the FOMC officially targets 2% headline PCE YoY, it generally pays more attention to the core rate. Goldman Sachs is on the dovish side of consensus, with its economic team noting that about half of the monthly core PCE jump is due to portfolio-management inflation (which occurs when the stock market rises). Their point is that inflation is not as imposing a concern as other forecasters suggest.
Wholesale Were Prices Little Changed in July, Thanks to Lower Oil
Source: Econoday
Consumers Took a Breather in July
But the dovish data was not over with last Thursday’s PPI. The following day, on one of the quietest trading sessions of the year, Retail Sales crossed the wires. The U.S. Commerce Department reported that spending was down to begin the second half, but there were caveats here, too. FIFA World Cup-related spending in June and Amazon’s (AMZN) Prime Day event (matched by other retailers, like Target (TGT) and Walmart (WMT)) made for a difficult month-on-month comp.
All told, headline Retail Sales declined by 0.6%, much worse than the +0.1% consensus. The core control group, which feeds into the Q3 GDP calculation, dipped by 0.4%. Additional basis points were shaved off the year-end Fed Funds rate in the futures market with all the key July data in hand.
July Retail Sales Disappointed, But Markets Shrugged It Off
Source: Econoday
Taken with the cacophony of retail executives underscoring consumer resilience, it’s possible (if not probable) that July’s soft spending report was a blip, not the start of a new trend. Additional color came (and still comes) this week from the nation’s biggest retailers’ Q2 reports and commentaries... go back and listen in on their calls and be sure to dig through the 10-Qs and slide decks. WMT’s Q2 comes out Thursday morning, the week’s most important event.
Salad, Burrito & Pizza Woes
There are some consumer blemishes this summer, however. The Cyclospora outbreak has taken its toll on names like Sweetgreen (SG) and Yum Brands (YUM), while Chipotle (CMG) has been stung by reduced burrito demand following the multi-state jalapeño Salmonella outbreak. Those may be one-offs, but other fast-casual names face longer-term issues.
On August 6, when it reported earnings, Papa John's International (PZZA) suspended its dividend. The announcement sent shares tumbling. PZZA plunged 17%, its worst day since COVID (and back to 2000, before that). In a year light with dividend cuts, this one stood out within the Consumer Discretionary sector.
Solid Dividend Trends in 2026
Source: Wall Street Horizon
Hello, Wyoming!
Looking ahead, following this week's retailer earnings, all eyes will soon turn to the shadows of the Grand Tetons in Jackson Hole, Wyoming. Presumably, Fed Chair Kevin Warsh will address the financial world on Friday, August 28, at 10 a.m. ET. The event, hosted by the Federal Reserve Bank of Kansas City, is an annual gathering of central bankers, and markets have been treated to volatility catalysts in recent years. Recall former Fed Chair (now Governor) Jerome Powell’s 2022 “painful” missive, followed by a more sanguine speech in 2024, in which he teed up the first of six quarter-point cuts following the 2022-2023 rate-tightening cycle. Next Friday’s event takes on added importance, being rookie Warsh’s first Jackson Hole.
From there, be sure to keep tabs on the turn-of-month interim data produced by many tech and consumer companies, along with a very busy conference circuit even before the September 7th US market holiday. We’ll keep you abreast of all the major corporate event risk catalysts to help all investors, traders, and portfolio managers stay ahead of the volatility.
The Bottom Line
It has been a stellar Q2 earnings season, but we aren’t done yet. After the big retailers this week, Jensen Huang and NVIDIA grab the spotlight on Wednesday, August 26. Then Kevin Warsh takes the podium on the 28th. Through it all, daily market swings hinge on the latest AI developments, along with consumer trends and what’s happening geopolitically. It’s no time to mail it in ahead of Labor Day, and knowing all the event catalysts is crucial this time of year.
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