Inflation, Fed meeting to give clues for U.S. market direction

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Soft landing hopes will face a stiff test

Investors will closely watch next week’s inflation numbers and Federal Reserve meeting for clues on whether the soft landing hopes that drove stocks to record highs are still justified.

“The market would like some clarity and not see the Fed have to wait until December or January to begin cutting rates,” said Paul Christopher, head of global market strategy at the Wells Fargo Investment Institute, adding a long period of elevated borrowing costs could hurt the economy. Despite the S&P 500′s march to new records, some investors worry the gains have concentrated in a few giant technology and growth names such as Nvidia, with the rest of the rest of the market far more tepid.

Plenty of investors believe strong corporate results and a relatively benign macroeconomic environment can keep supporting stocks. First quarter earnings came in about 8.1% above analyst expectations, according to LSEG data. Others believe political uncertainty, not economic data, will cause turbulence later this year. The first debate between President Joe Biden, a Democrat, and Republican challenger and former president Donald Trump will take place June 27, nearly three months earlier than the Sept. 16 date suggested by the nonpartisan Commission on Presidential Debates, which has managed them since 1988.

 

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