Analysis: Investors just got a wake-up call on inflation. Will they respond? | CNN Business

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Inflation rates in Canada, the EU and Australia have risen the most in recent months. Recent price data from the United States, however, has been rosy.

That contrast has led investors to wonder whether the Federal Reserve’s current longer-term policy isn’t such a bad idea after all.

Moving tiles: Over the past year, investors have been vocal in their desire for the Federal Reserve to cut interest rates, while some central bank officials have been equally vocal about keeping them higher for longer.

Friction between the two groups occasionally heats up, erupting in periods of market volatility — big gains after a promising piece of economic data or declines after a Fed official tries to lower Wall Street’s interest rate expectations.

But that disconnect appears to be fading as US inflation rates continue to ease.

Looking abroad: Wall Street is directly afraid of its neighbors to the north and far west.

Canadian prices rose unexpectedly in May, according to data released shortly after the Bank of Canada cut interest rates for the first time in four years.

The next day, inflation in Australia jumped to its highest level in 2024, adding to fears. In Europe, the eurozone’s consumer price index moved higher in May but eased in June – according to data on Tuesday – although core inflation was flat at 2.9%.

The United States also had a recent scare as inflation rates rose.

“We believe that easing financial conditions in late 2023 may have contributed to the temporary revival of price pressures,” Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management, said in a note on Monday.

But after a year in which the Fed held interest rates steady at a 23-year high, inflation rates in the United States are falling again.

The latest reading of the Personal Consumption Expenditure index along with the latest Consumer Price Index report released earlier in June both “suggest that the price increase seen at the beginning of the year has stalled and the disinflation process may to have restarted,” Schutte said.

High inflation readings around the globe are worrying investors, José Torres, senior economist at Interactive Brokers, told CNN. That concern has made them more receptive to keeping the Fed rates higher, at least for now.

The market’s outlook for future Fed rate cuts is stabilizing around just one rate cut this year, Torres said. Investors are accepting the higher outlook for longer.

A warning: The Bank for International Settlements, the umbrella body for central banks around the globe, has even taken note. They warned central banks in their annual report published on Sunday to set a “high bar for policy easing”, noting there was a high risk that cheaper rates could fuel price increases.

“A premature easing could revive inflationary pressures and force a costly policy shift – all the more costly because credibility would be undermined,” the BIS said.

it’s coming: Investors are looking ahead to the non-farm payrolls for June, due out on Friday morning. These numbers can provide them with more context about the state of the economy and clues about what the Federal Reserve might do next.

Shares of online home products retailer Chewy went on a wild ride Monday after Keith Gill, the influential meme stock trader also known as “Roaring Kitty,” revealed a large stake in the company, reports my CNN colleague Krystal Hur.

On Monday, Gill said in a securities and exchange filing that he bought about 9 million Chewy ( CHWY ) shares, amounting to a 6.6% stake in the company.

Chewy shares closed up 6.6% down on Monday after jumping as much as 10% earlier in the session.

Chewy shares began to gain last Thursday after Gill, the individual investor who helped spark the frenzied trading around GameStop stock three years ago, posted a photo of a cartoon dog on his X account. The cartoon’s blue background looked that it was the same blue as Chewy’s logo. The company’s shares rose more than 34% on the day at their highs before closing 0.3% lower.

Meme stocks typically move on social media sentiment rather than fundamentals, often posting large swings based on the buying and selling of influential traders like Gill.

Ryan Cohen, the founder of Chewy, is the chief executive of GameStop, the video game retailer Gill is known to champion.

The parent company of Redbox, those distinctive red kiosks in grocery stores that sell or rent DVDs, has filed for bankruptcy after months of financial struggle, my colleague Jordan Valinsky reports.

Chicken Soup for the Soul Entertainment (CSSE) revealed in a filing that it is nearly $1 billion in debt and owes millions of dollars to several entertainment companies, including the BBC and Sony Pictures, plus retailers ranging from Walmart to Walgreens.

The filings show the company took on about $325 million in debt after the 2022 acquisition of Redbox by private equity giant Apollo Global Management. The plan was to turn it into an entertainment conglomerate, combining its DVD rental business with its free streaming services, such as Crackle, the entertainment platform once owned by Sony.

Those plans fell through, hampered by the twin attacks of Hollywood limiting the production of fresh content and the decline in people renting physical DVDs, which even forced rival Netflix to exit that part of its business last year.

CSSE declined to comment.