The Federal Reserve’s next interest rate decision and May inflation data, due to be released on Wednesday, will play a key role in stock price movements next week. They are likely to bring further volatility to an already anxious market. Stocks are likely to end the first strong week of June on a positive note. NVIDIA has propelled the market to new highs, briefly surpassing $3 trillion in market capitalization and briefly overtaking Apple to become the second-largest company behind Microsoft. Meanwhile, GameStop has continued to fluctuate wildly as a meme stock, first rising and then falling. Investors continued to look for signs of a cooling in the labor market on hopes that a slowing economy might prompt the Fed to cut interest rates, but hopes of near-term easing were dashed by a stronger-than-expected May nonfarm payrolls report. Friday’s employment report showed payrolls rose by 272,000 in May, well above the economists’ consensus estimate of an increase of 190,000, according to a Dow Jones survey. May’s gains also significantly outpaced April’s 175,000 new jobs. With more workers joining the workforce, the unemployment rate rose to 4% for the first time since 2022. The results will likely complicate Wednesday’s Federal Reserve policy meeting and, importantly, further delay the timeline for any rate cuts. “Today’s data raises the question of whether we might just see another cautious statement from the central bank governor if we see numbers that are more or less in line with expectations (no clear path forward) or a surprise,” said Katherine Kaminski, chief research strategist and portfolio manager at Alpha Simplex Group. Fed Rate Decision All eyes are on the Fed next week and its interest rate decision, scheduled to be announced at 2 p.m. on Wednesday. Pressure is on Federal Open Market Committee (FOMC) members after the European Central Bank (ECB) cut interest rates this week for the first time since 2019 despite persistent inflation pressures from the European Union (EU). More important than next week’s rate decision itself is the Fed’s latest interest rate forecast and the timing of any cuts. That’s likely to drive markets over the coming week, according to Scott Wren, senior global market strategist at Wells Fargo Investment Institute. Last time the Fed released its latest forecast in March, policymakers called for at least three rate cuts in 2024. But since then, investors have tempered their expectations as inflation data has struggled to pick up. “We want to see the Fed rule out a July cut and not say anything to suggest it’s still possible,” said Tony Ross, chief investment officer at Wilmington Trust, noting there are two more releases of the Fed’s preferred inflation gauge, the Personal Consumption Expenditures Price Index, ahead of the July meeting. Federal funds rate futures are currently pricing in a 54% chance of a September cut and a nearly 90% chance of easing in December, according to CME Group’s FedWatch. Any hint next week that a rate cut could come sooner than September would be a dovish signal to the market, said Dana D’Auria of Envestnet. Investors will want to hear next week that the Fed may start cutting rates in September or that inflation is not out of control and will force it to postpone easing until the end of 2024, said Dauria, the firm’s co-chief investment officer. May CPI Report Weak inflation data has raised concerns for months that the Fed may keep the federal funds rate at its current 5.25% to 5.50% until there is more evidence that inflation is converging, and that easing will be delayed much longer than previously expected. That makes the May Consumer Price Index report, due before the market opens on Wednesday, another key focus for investors. Economists surveyed by Dow Jones expect the Consumer Price Index to rise 3.4% year-on-year and 0.1% month-on-month. Core CPI, which excludes food and energy, is also expected to rise 3.4% year-on-year and 0.3% month-on-month.”The Fed has said it needs to be confident that both inflation and labor market data are cooling,” Wells Fargo’s Wren said in a client note. “That means the inflation decline will continue for more than a month or two. The problem is that the latest data shows only tentative, early signs of such a move.” Apple Developer Conference Investors will also be keeping an eye on Apple’s Worldwide Developers Conference in Cupertino, California, on Monday, where the iPhone maker is widely expected to unveil its latest software updates. Investors continue to favor companies with clear plans, putting Apple under pressure to reveal its AI plans. Apple’s AI monetization strategy has been shrouded in mystery compared to competitors, fueling investor concerns that Apple may be falling behind. “This is an event with some pretty significant implications for the entire technology industry,” said John Belton of Gabelli Funds. The portfolio manager expects Apple to unveil new AI integrations in iPhone models and potentially test new features built into apps like Notes and Safari. Apple may also signal plans to develop its own data center chips, he added. Calendar for the upcoming week Monday, June 10th 1:00 PM: 3-year Treasury note auction Tuesday, June 11th 6:00 AM: NFIB Small Business Index (May) 1:00 PM: 10-year Treasury note auction Earnings release: Casey’s General Stores Wednesday, June 12th 7:00 AM: Weekly Mortgage Applications (week ending June 7th) 8:30 AM: Consumer Price Index (May) 2:00 PM: FOMC policy announcement 2:30 PM: Fed Chairman Powell press conference Earnings releases: Broadcom, Dave & Buster’s Thursday, June 13th 8:30 AM: Weekly Unemployment Insurance Claims (week ending June 8th) 8:30 AM: Producer Price Index (May) 1:00 PM: 10-year Treasury note auction Time: 30-Year Treasury Bond Auction Earnings Announcements: Adobe, Signet Jewelers, John Wiley Friday, June 14 8:30 AM: Import and Export Prices (May) 10:00 AM: University of Michigan Consumer Sentiment Index (June Preliminary)
