Investors Brace for Another Big Week in the Markets

Why markets are still worried

A sense of calm has returned to global markets on Monday, but the economic conditions that triggered last week’s roller coaster swings are still on many minds ahead of a pivotal week.

Here’s the latest:

• S&P 500 futures were up slightly after fears of a slowdown in growth and hiring rocked the benchmark index last week. Investors endured both a stomach-churning rout on Monday and a bounce-back rally on Thursday. Despite that, the S&P 500 ended the week down just 0.04 percent.

• Investors rushed back into tech stocks even as a “bubble” warning loomed about Nvidia, the chipmaker at the heart of the artificial intelligence boom.

• Stocks in Europe and Asia gained on Monday, as did the price of oil and crypto.

The big event this week is Wednesday’s inflation data. Economists forecast that the Consumer Price Index will show a slight uptick. Yet Wall Street doesn’t think that will dissuade the Fed from cutting interest rates at its next meeting in September. That said, Michelle Bowman, a Fed governor, still sees inflation as “uncomfortably above the committee’s 2 percent goal.”

With markets on edge, traders see a big potential swing in the S&P 500 after the report comes out.

Interest rates are a concern for consumers, too. If the central bank doesn’t “start taking them down relatively soon, you could dispirit the American consumer,” Brian Moynihan, the C.E.O. of Bank of America, warned in a CBS News interview on Sunday.

Markets are still on edge. Early last week, the VIX, Wall Street’s so-called fear gauge, spiked near to levels last reached during the early days of the Covid pandemic and the 2008 global financial crisis. Investors are anxious after tepid jobs and manufacturing data suggested a slowdown was on the horizon.

The mountain of levered bets in the market probably added to the volatility. To cash in on a yearlong rally, more traders have borrowed funds to pay for new trades. One favorite: the so-called carry trade involving Japanese equities. But when the outlook soured last week, such trades began to unravel, triggering a stampede of investors selling even profitable positions to cover losses elsewhere.

The underlying problems aren’t fixed, economists warn. Lower-income consumers have been pulling back on spending for months. That brings this week’s earnings calls into focus with Home Depot and Walmart set to report on Tuesday and Thursday.