Inflation Week on Wall Street Comes as Tariff Risk Re-Emerges

Investors may be happy to shift some of their focus away from the ongoing tariff saga and back toward economic data and earnings reports. This is a big week, as the June Consumer Price Index (CPI) and Producer Price Index (PPI) hit the tape, while the Q2 reporting season kicks off in earnest with the banks. Then on Thursday, our economic calendar shows that the US Census Bureau will report June's Retail Sales.

The Second Half Begins with a Tariff Bang

It's a trove of information for portfolio managers and macro-watchers to gauge, and trade policy news headlines are likely to continue breaking. On July 9, President Trump announced a surprise 50% levy on copper imports, followed by a steep 50% duty on Brazil.[1] Together, it put the Materials sector in focus.

Although early, the resource-rich area was the second-best Q3 performer among the 11 S&P 500 groups through last Wednesday, outpacing the Information Technology sector and the high-momentum Industrials space. I.T. has been in the spotlight with NVIDIA NVDA becoming the first company to eclipse a $4 trillion market cap, while Industrials tagged a new all-time high just a handful of sessions ago.

So, the small sector has been on a big run...a bit under the radar, too. Will the one-two punch of copper and Brazil duties be a game-changer? It's hard to say right now, but once Q2 earnings reports are in hand, the situation may become clearer. Investors should also mark August 1 (while erasing July 9) on their calendars, as that's when the president's new reciprocal tariff rates may take effect.

Interim Data: Rio Tinto's Q2 Production Figures

In the here and now, we might capture clues from a metals and mining firm this week. Rio Tinto Group RIO, a $100 billion market cap Materials sector company, will issue its Second Quarter Operations Review on Wednesday. In April, RIO posted strong numbers, but weather impacts were significant over the January through March stretch for the global mining firm. It also took on a substantial amount of debt due to a recent acquisition.[2]

Three months ago, the management team noted progress at several of its key mines and a well-supported copper market. This week's update may touch on some tariff-related developments, but a full briefing on the state of the metal and mining industry may not come until its full first-half earnings release, which prints on Wednesday, July 30.

Shares have trailed both the S&P 500 and the iShares Global Materials ETF (MXI) so far this year, last week's rally notwithstanding, and heightened macro volatility on the tariff front adds uncertainty to the mix. RIO is a UK-headquartered company, and with a trade deal inked with the US, there is some clarity on that front. The stock notched a seven-week high last Thursday.

Macro Spotlight: June CPI and Retail Sales

Shifting gears to macro data on the home front, the action gets underway Tuesday morning with June CPI. The big question is: to what extent did tariffs seep into consumer prices last month? At an event on July 10, St. Louis Fed's Alberto Musalem said he expects tariffs to hit inflation beginning in June.[3]

Zooming out, May's CPI and PPI reports were relatively tame, offering hope that households and businesses might not feel as much of a pinch from import duties as initially feared. Of course, there was significant stockpiling of goods ahead of so-called Liberation Day, and most of the more punitive reciprocal tariffs have yet to take effect.

So, we still won't have complete clarity from June's inflation data alone. What could be more important this week is Retail Sales. There are emerging signs that consumers are tightening their purse strings at least somewhat. Last month, it was reported that May Retail Sales fell by 0.9%, worse than expected, while May's US Personal Spending report revealed the first sequential drop since January.[4] Timelier weekly Johnson Redbook year-over-year retail sales growth has also slowed down.

Then, just last week during Amazon's AMZN four-day Prime Day event, first-day sales were said to be down 41% compared to 2024's promo period. An Amazon spokesperson disputed that report, calling it highly inaccurate.[5] Price action in the mega-cap stock seemed to side with the company, not the newsAMZN hovered between $220 and $225, close to its best mark since February.

The Policy Impact

Together, June CPI and Retail Sales might not be enough to sway the Federal Reserve from keeping its policy rate unchanged at the July 29-30 meeting. Following a solid jobs report for last month and only more unease around tariffs in recent days, Chair Powell may opt for a continued wait-and-see" approach.

Still, odds are the Federal Open Market Committee (FOMC) will resume cutting rates in September. Between now and then, the Fed will gather with other central banks in August at the Jackson Hole Economic Policy Symposium hosted by the Federal Reserve Bank of Kansas City.

Finally, don't sleep on the PPI report. It crosses the wires on Wednesday morning, between CPI and Retail Sales. Items in the wholesale price report tend to feed more directly into the Personal Consumption Expenditure (PCE) Price Index, the Fed's preferred inflation gauge.

Soft inflation and retail sales data would only put more pressure on the Fed to cut rates sooner rather than later. All the while, Powell, whose term as Fed chief ends next May, continues to be berated by President Trump for not easing monetary policy.

The Bottom Line

Bank earnings roll in this week. The likes of JP Morgan Chase (JPM), Wells Fargo (WFC), Citigroup (C), and Bank of America (BAC) post Q2 numbers mid-week. We'll also get clues from macro bellwether areas, including the mining industry. CPI, PPI, and Retail Sales litter the tape, too, keeping investors on edge. The next few weeks will set the tone for the second half.

1 Trump sets 50% US tariffs on copper, Brazilian imports starting in August, Reuters, David Lawder, Andrea Shalal, Julia Payne, July 10, 2025, https://www.reuters.com

2 First Quarter Operations Review 2025, Rio Tinto, Quarterly Operations Review, 15 April, 2025, https://www.riotinto.com

3 Fed's Musalem: Expect Tariffs To Hit Inflation Beginning In June Data, X, LiveSquawk, July 10, 2025, https://twitter.com

4 Retail sales fell 0.9% in May, worse than expected, as consumers pulled back, CNBC, Jeff Cox, June 17, 2025, https://www.cnbc.com

5 Amazon Disputes Claim Of Plunging Prime Day Sales After Reported 41% Drop, Forbes, Zachary Folk, July 9, 2025, https://www.forbes.com

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