Inflation, Fed meeting to give clues for US market direction
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.
This year's rally has lifted the S&P 500 up more than 12% year-to-date, on expectations the Fed can cool inflation without hurting growth. Yet recent economic data have sent conflicting signals: U.S. employment numbers released Friday were far stronger than expected, while earlier reports showed a slowdown in manufacturing and a first-quarter growth rate revised lower.
May inflation data, due next Wednesday, must walk a tightrope to satisfy expectations of a «Goldilocks economy»: satisfactory growth with prices under control. Later that day, investors will look to the Fed for signals on the central bank's rate cut plans.
«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.
Nonfarm payrolls increased by 272,000 jobs last month, the Labor Department's Bureau of Labor Statistics said on Friday, exceeding 185,000 jobs forecast by economists in a Reuters poll. After the data, futures markets showed investors trimming expectations for rate cuts, with chances of a September cut falling to about 55% from about 70% before the report.
Strong employment data countered earlier reports suggesting the economy
