Next
week’s
inflation
data
will
be
the
first
major
test
for
markets
after
the
Federal
Reserve
took
a
dovish
stance
on
interest
rates,
at
a
time
when
bond
yields
also
look
to
be
stabilizing.
Stocks
have
been
churning
higher
lately
after
Fed
Chair
Jerome
Powell
indicated
rate
hikes
are
likely
off
the
table
,
a
position
that
investors
expect
is
a
bullish
event
for
equities.
A
strong
earnings
season,
as
well
as
some
cooler
labor
data
,
also
have
investors
more
optimistic
in
this
year’s
outlook.
The
Dow
Jones
Industrial
Average
on
Friday
registered
its
eighth
straight
day
of
gains,
or
its
longest
win
streak
going
back
to
December,
as
well
as
its
strongest
week
of
2024.
At
the
same
time,
the
10-year
Treasury
yield
has
also
pulled
back
from
its
highs,
last
at
about
4.5%
after
recently
topping
4.7%.
.DJI
1M
mountain
Dow
Jones
Industrial
Average
But
stocks
face
a
key
hurdle
next
week
with
the
release
of
April’s
consumer
price
index,
which
is
due
out
Wednesday.
A
reading
that
comes
in
line
with
expectations
could
signal
further
upside
ahead
for
stocks,
while
a
significantly
hotter
print
could
spook
investors
who
worry
Fed
policymakers
will
have
to
revisit
their
rate
expectations.
“The
Fed
has
made
it
clear
that
they
think
that
CPI
is
noisy,
or
just
inflation
is
noisy,”
said
Mike
Dickson,
head
of
research
and
quantitative
strategies
at
Horizon
Investments,
adding,
“However,
if
inflation
comes
in
materially
higher,
that’ll
have
a
pretty
big
impact
on
what
the
Fed
is
going
to
do.”
On
Friday,
all
three
major
averages
posted
a
winning
week,
with
the
30-stock
index
gaining
more
than
2%.
The
S
&
P
500
and
Nasdaq
Composite
were
higher
by
more
than
1%,
each.
The
market
reaction
Inflation
data
has
been
crucially
important
this
year
for
investors.
Not
only
have
investors
tried
to
decipher
the
moves
of
a
data-dependent
Fed,
but
the
inflation
reports
themselves
have
been
less
than
encouraging
as
of
late.
Stocks
fell
from
their
highs
of
the
year
as
investors
accepted
the
likelihood
that
it
may
take
the
Fed
longer
to
get
back
to
its
2%
inflation
target.
But
investors
are
more
hopeful
about
the
upcoming
slate
of
data,
with
UBS
saying
this
week
that
it
anticipates
a
“renewed
fall
in
U.S.
inflation
in
the
coming
months.”
The
April
CPI
set
for
release
next
week
is
anticipated
to
show
a
rise
of
0.4%
and
3.4%
on
a
monthly
and
yearly
basis,
respectively,
according
to
FactSet
consensus
estimates.
That
would
be
from
increases
of
0.4%
and
3.5%
the
prior
month,
respectively.
Core
CPI
is
expected
to
show
increases
of
0.3%
on
the
month
and
3.7%
on
the
year.
That
would
be
lower
from
respective
increases
of
0.4%
and
3.8%
in
the
prior
month.
However,
some
investors
say
they
will
pay
special
attention
to
how
markets
react
to
the
CPI
data,
more
than
they
will
to
the
report
itself.
Of
note,
Horizon
Investments’
Dickson
said
he
will
be
keeping
an
eye
on
the
ICE
BofAML
MOVE
Index
,
a
gauge
that
measures
volatility
in
the
fixed
income
market
much
like
the
CBOE
Volatility
Index,
or
VIX
,
tracks
volatility
in
stocks.
A
reading
above
100
in
MOVE
indicates
more
uncertainty
in
the
interest
rate
outlook,
and
can
be
a
bearish
signal
for
equities.
Recently,
the
MOVE
index
dipped
back
below
100
after
last
week’s
central
bank
meeting.
But
Dickson
is
hoping
the
index
continues
to
stay
relatively
benign
after
the
CPI
print
comes
in
as
expected,
or
even
a
bit
higher,
as
that
would
indicate
the
market
is
counting
on
the
Fed
to
remain
dovish.
“That
would
be
a
great
outcome
because
it
would
say
the
market
has
confidence
in
what
the
Fed
said
last
week,”
Dickson
said.
“And
so,
that
would
be
an
important
statistic
to
keep
an
eye
on.”
‘Fear
the
cut,
not
the
pause’
Getting
past
CPI
could
mean
further
upside
ahead
for
stocks,
especially
as
more
investors
come
around
to
the
idea
that
a
Fed
pause
spells
good
news
for
equities
.
In
fact,
the
S
&
P
500
has
averaged
a
6%
gain
during
previous
pauses
over
the
past
50
years,
according
to
Jeff
Buchbinder,
chief
equity
strategist
at
LPL
Financial.
But
that
advance
actually
jumps
to
13.1%
on
average
over
the
last
six
pauses
going
back
to
1989,
as
gains
have
accelerated
in
more
modern
market
history.
“Long
pauses
are
typically
good
for
stocks,
and
the
gains
achieved
since
the
Fed’s
last
hike
in
July
2023
are
consistent
with
recent
history,”
Buchbinder
wrote
in
a
recent
note.
Elsewhere,
Strategas’
Jason
De
Sena
Trennert
told
investors
in
a
note
this
week
that
they
should
“fear
the
cut,
not
the
pause,”
as
Fed
easing
is
“usually
associated
with
economic
and
market
stress.”
Unless,
of
course,
the
central
bank
manages
to
achieve
a
soft
landing.
For
investors
hopeful
the
S
&
P
500
could
end
the
year
higher
from
here,
even
after
an
already
stellar
start,
that
could
mean
a
buying
opportunity.
Growth
investor
Ken
Mahoney,
CEO
at
Mahoney
Asset
Management,
anticipates
investors
can
now
buy
back
into
the
megacap
tech
stocks,
except
Tesla,
after
their
recent
declines.
“Big-cap
tech
were
tested
in
April,”
Mahoney
said.
“But
after
earnings,
I
think
…
the
balance
sheets,
the
buybacks,
the
growth
potential,
the
AI
potential,
and
so
on,
all
those
headwinds
are
still
intact.”
If
anything,
the
investor
said
the
ability
of
stocks
to
make
it
over
the
recent
wall
of
worry
could
mean
the
gains
from
here
on
out
are
more
sustainable.
“In
April,
the
market,
I
think,
got
hit
three
different
times,
and
held
on
very
nicely,”
Mahoney
said.
“So
I
think
that’s
another
reason
why
there’s
a
sense
of
bullishness
again.”
Consumer
earnings
reports
are
also
on
deck
next
week.
Home
Depot
reports
Tuesday,
as
does
Charles
Schwab.
Walmart
and
Deere
report
Thursday.
Week
ahead
calendar
All
times
ET.
Monday
May
13
No
notable
events
Tuesday
May
14
8:30
a.m.
Producer
Price
Index
(April)
Earnings:
Home
Depot
,
Charles
Schwab
Wednesday
May
15
8:30
a.m.
Consumer
Price
Index
(April)
8:30
a.m.
Hourly
Earnings
(April)
8:30
a.m.
Average
Workweek
(April)
8:30
a.m.
Empire
State
index
(May)
8:30
a.m.
Retail
Sales
(April)
10
a.m.
Business
Inventories
(March)
10
a.m.
NAHB
Housing
Market
Index
(May)
Earnings:
Progressive
,
Cisco
Thursday
May
16
8:30
a.m.
Building
Permits
preliminary
(April)
8:30
a.m.
Continuing
Jobless
Claims
(05/04)
8:30
a.m.
Export
Price
Index
(April)
8:30
a.m.
Housing
Starts
(April)
8:30
a.m.
Import
Price
Index
(April)
8:30
a.m.
Initial
Claims
(05/11)
8:30
a.m.
Philadelphia
Fed
Index
(May)
9:15
a.m.
Capacity
Utilization
(April)
9:15
a.m.
Industrial
Production
(April)
9:15
a.m.
Manufacturing
Production
(April)
Earnings:
Take-Two
Interactive
Software
,
Applied
Materials
,
Walmart
,
Deere
Friday
May
17
10
a.m.
Leading
Indicators
(April)
