MARKET COMMENTARY
Markets head into mid-June on a positive footing, with the S&P 500 and Nasdaq trading near all-time highs despite last week’s mixed jobs report data. Investors are closely watching this week’s economic data, which could be pivotal in shaping the Federal Reserve’s next move on interest rates.
U.S.–China trade negotiations officially kicked off in London today, as both sides look to de-escalate ongoing tensions. In a show of good faith, each country agreed to temporarily reduce tariffs, a move that has slightly lifted market sentiment. Still, uncertainty around the outcome continues to loom over global markets.
The spotlight this week is on Wednesday’s Consumer Price Index (CPI) report for May. The CPI report is a key indicator of inflation that has potential to influence the Fed’s decision whether to begin cutting rates this summer. Lower than expected CPI report could give investors hope amid a higher chance of a September rate cut. Thursday’s Producer Price Index (PPI) is another important inflation metric that comes from the perspective of producer/sellers.
The labor market is showing some signs of softening despite last week’s solid nonfarm payrolls report. Rising layoffs and higher jobless claims point to weakening confidence, though some of this may reflect seasonal trends. However, May’s ISM Services employment data returned to expansion, illustrating a tougher labor market than expected.
From a technical perspective, the S&P 500 recently broke out of the 5900-resistance level for the first time since late February and is nearing bull market territory. AI-related names continue to drive most gains, while cyclical sectors remain range-bound. With the Fed in its pre-meeting blackout period ahead of next week’s FOMC decision, this week’s inflation data will likely set the tone for markets through mid-month. Data that backs the idea of cooling prices could send equities into a bull market; however, surprising inflation data has the risk of reigniting volatility and recalibrating the Fed outlook.
Economic Releases This Week
Monday: Wholesale Inventories
Tuesday: NFIB Optimism Index
Wednesday: Consumer Price Index, Core CPI, Monthly US Federal Budget
Thursday: Initial Jobless Claims, Producer Price Index, Core PPI
Friday: Consumer Sentiment
Stories to Start the Week
Warner Discovery Splits Cable From Marquee Streaming, Studio Businesses
Marines Are Deploying to Los Angeles Area in Wake of ICE Protests
Israeli Forces Seize Gaza Aid Boat Carrying Greta Thunberg
Carney Rules Out Tax Increases to Finance Higher Canada Defense Spending