Fed's preferred inflation gauge and second quarter GDP: What to know this week

The rate cut that everyone was waiting for finally arrived. Markets offered a resoundingly positive response to the end of the Federal Reserve's tightening campaign. But the euphoria was only fleeting. Friday's trading brought fresh concerns over corporate earnings and economic growth.

Stocks, however, still posted overall wins for the week. The S&P 500 (^GSPC) ended the week up about 1.4%. The Dow Jones Industrial Average (^DJI) put on 1.6%, while the Nasdaq Composite (^IXIC) gained 1.5%. While Friday brought down the S&P, the index notched an all-time high earlier in the week and the Dow closed with a record.

The biggest question for investors this upcoming week is whether a new batch of data supports Fed Chair Jerome Powell's assertion that the US economy remains strong. A second quarter GDP reading due Thursday will help test that contention.

Fed Chair Jerome Powell was also careful not to declare a victory over inflation as pricing pressures continue to come down. Friday's scheduled release of the Personal Consumption Expenditures (PCE) index, the Fed's preferred inflation gauge, will offer another progress report on that front.

Quarterly earnings reports from Costco (COST), Micron (MU), and Accenture (ACN) are also on deck.

What's next for the Fed?

The quiet period is over and so is the tightening. The public is set to receive fresh commentary from Fed officials in the days after the momentous shift away from a restrictive monetary policy. Perhaps the biggest question for policymakers is, where do we go from here?

At least eight central bank officials, including Powell, Federal Reserve vice chair for supervision Michael Barr, and New York Fed chief John Williams, are scheduled to offer speeches or participate in conferences in the days ahead, likely giving color to the Fed's decision to cut interest rates by 50 basis points. Fed members see two more 25 basis point cuts this year, followed by four more in 2025.

Powell has said the central bank was not playing catch-up in opting for a larger rate cut, addressing criticism that the Fed should have eased rates at their last policy huddle in July. He's also stated that cuts of 50 basis points shouldn't be thought of as the new norm. But a greater slowdown in the labor market could challenge both of his contentions.

Read more: The Fed rate cut: What it means for bank accounts, CDs, loans, and credit cards

The new risks and the old

Inflation was so high and the job market so tight that curbing price increases was the Fed's sole focus over the last two years. But now that inflation is cooling and the job market showing signs of slowing, the Fed has to advance its mandate on both fronts.