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Stocks surged on Tuesday, and investors indeed had reason to cheer: Strong economic data just keeps pouring in.
June consumer confidence data was the highest it's been in 18 months. Both April home prices and May new home sales surprised to the upside. And durable goods orders grew in May too, even as economists had been expecting a decline.
Rewind a few weeks and you'll find May retail sales that beat estimates and a blowout jobs report. Expand beyond traditional economic readings, and you can find more travelers passing through TSA checkpoints than in 2019 in seven of the last 10 days.
Put together, economists are increasingly less worried about a recession this year. Consumers agree with that sentiment, too, with 69.3% of consumers saying a recession in the next 12 months is "somewhat" or "very likely," down from 72.2% in May, according to Tuesday's consumer confidence report from the Conference Board.
"Consumer attitudes remain resilient," Jefferies US economist Thomas Simons wrote in a note on Tuesday. He added: "There are storm clouds on the horizon, but the consumer is growing tired of the expectation that a recession is imminent."
The data continues to point to an interest rate hike in July as the Fed tries to combat sticky inflation.
On Tuesday, futures markets tied to the Federal Reserve's benchmark priced in a nearly 77% chance of an interest rate hike at the Fed's July meeting, per the CME FedWatch Tool. That mark remained unchanged from last week when Fed Chair Powell teased out at least one more 2023 hike while testifying in front of policymakers.
Two key data points for the Fed are expected in the next 10 days. The Personal Consumption Expenditures (PCE) index, the Fed's preferred inflation indicator, is expected Friday while the June jobs report will come on July 7.
The early indications are that, like the strong data from the past few weeks, PCE will likely also indicate the Fed's work isn't done.
Data on Friday is expected to show "core" PCE — which strips out the costs of food and energy — rose 4.7% over the prior year in May, unchanged from April. The Fed targets 2% inflation, on average. Over the prior month, "core" PCE is expected to rise 0.4% in May.
"The Fed has set a high bar for not raising rates again," Oxford Economics US economist Nancy Vanden wrote in a note on Friday. "While we maintain our forecast for no additional rate increases, the risk for another hike in July is high unless incoming data show a marked slowdown in inflation pressures."