Economy Shows Signs of Warming: CPI, Q2 Bank Earnings

Tuesday, July 15, 2025

Events begin to pick up this morning for the ongoing trading week. Following a fairly dormant period of the last week and a half or so, we’re finally getting down to some real nitty-grit. Pre-markets are bouncing around a bit at this hour, but looking to push fully into the green ahead of the opening bell. The Dow is down -34 points, but the S&P 500, Nasdaq and small-cap Russell 2000 are all up: +25 points, +160 and +5 points, respectively.
 

CPI for June In-Line with Warmer Expectations

The latest Consumer Price Index (CPI) report is out this morning, reporting on the month of June: +0.3% month over month is as expected, and 20 basis points (bps) warmer than the +0.1% reported the previous month. Subtracting volatile food and energy costs, core CPI month-over-month came in a tad cooler: +0.2%, also off +0.1% the prior month.

Year-over-year CPI is also known as the “Inflation Rate,” and this we see has swelled +30 bps month over month to +2.7%. This is the highest we’ve seen since February, and further looks like a bounce off the near-term low of +2.3% — which was still hotter than the Fed’s optimal +2.0% yearly rate of inflation — back in April. Core CPI year over year reached +2.9%, up 10 bps month over month and 10 bps under estimates.

We noted the Fed’s preferential rate on inflation, but in many ways this notion is on borrowed time. A replacement of Jerome Powell as the Chair of the Federal Reserve would no doubt usher in a dovish regime on interest rates — currently remaining between +4.25-4.50%, where it’s been since December — and would thus most likely justify a higher Inflation Rate — say, +3% — at some point in the future.

Empire State Swings to Positive in July

The monthly manufacturing survey for New York State — the Empire State Index for July — swung to a positive +5.5 points this morning, up from an expected -9.0 and an unrevised -16.0 reported for June. This is again the highest since February, and follows four-straight down-months on this metric. Here’s another signal that the economy is warming up again.

Big Banks Kick-Off Q2 Earnings Season

Speaking of New York, three of the biggest banks on Wall Street reported Q2 earnings this morning, with beats across the board on both top and bottom lines. Yet more evidence the economy is advancing better than had been expected.

JPMorgan Chase JPM posted as typically impressive Q2 report, with earnings of $4.96 per share springing to a +10% surprise over estimates (and the $4.40 per share reported in the year-ago quarter). Revenues of $44.91 billion outpaced estimates by +2.5% (though off the $50.2 billion in generated revenues from the year-ago quarter). Shares have made back their near-term dip, and remain up +20.4% year to date. For more on JPM’s earnings, click here.

Citigroup C also improved over expectations in its Q2 results this morning, with earnings of $1.96 per share easily surpassing the $1.61 in the Zacks consensus. Revenues of $21.67 billion beat the $20.98 billion analysts were looking for. This earnings beat was even better than the trailing 4-quarter average, +8.75%, for Citi’s 10th straight earnings beat. (You can see the full Zacks Earnings Calendar here.)

Wells Fargo WFC likewise demonstrated a better-than-expected ability to realize profits in its Q2 this morning, with earnings of $1.54 per share zipping beyond the $1.41 projected, as well as the $1.33 per share reported for Q2 2024. Revenues of $20.82 billion amounted to a positive surprise of a more-modest +0.57%. Net Interest Income was shy of estimates, however, as we see in this morning’s slight selloff. For more on WFC’s earnings, click here.

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