US Stocks Poised for Gains Ahead of Inflation, Fed: Markets Wrap

(Bloomberg) — US stocks are set to extend their record-setting rally as traders position for the potential disruption from US inflation data landing just hours ahead of Federal Reserve’s interest rate decision on Wednesday.

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Futures contracts for the S&P 500 and Nasdaq 100 edged higher after the gauges closed at new highs in the previous session. The dollar stood firm following four days of gains. Treasuries were steady after rising on a solid $39 billion sale.

Investors are preparing for a rare double-whammy of US CPI data and Fed announcements that have the potential to upend markets. While policymakers are widely expected to hold borrowing costs at a two-decade high, there’s less certainty on officials’ quarterly rate projections, also known as the dot plot.

“Today is a big day in terms of economic data and Fed announcement,” said Ipek Ozkardeskaya, an analyst at Swissquote Bank. “It could determine the global market mood for the rest of the month, and a good part of summer.”

Bloomberg Economics expects that the dot plot will indicate two 25-basis-point cuts this year, compared with three in the March version. The CPI print for May will likely give the Fed some additional reassurance that inflation is slowing, the economists said.

“If it’s two, I think the market reaction can be quite positive and would support new highs in the S&P 500,” Grace Peters, head of investment strategy for Europe, Middle East and Africa at JPMorgan Private Bank, said on Bloomberg TV.

JPMorgan Chase & Co’s trading desk said in a note that clients were wary of missing out on the next leg of a potential rally.

“Clients are worried about missing upside, not downside,” Matt Reiner, an equity sales trader at the bank said in the note. “My clients are trimming safety and adding to momentum longs.”

The May consumer price index reading is due at 8:30 a.m. New York time, while the rate decision and projections will be released at 2 p.m. in Washington. Fed Chair Jerome Powell will hold a press conference 30 minutes later.

Oracle Corp., meanwhile, is set to open at a record high after surging in premarket trade. The software company reported better-than-expected bookings and announced partnership deals with rivals.

In Europe, the volatility of the past two days appears to be subsiding after investors were caught unprepared for French far-right gains in the weekend’s European Parliament elections.

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Banks led a 0.7% advance in the Stoxx 600, ending three sessions of losses. French 10-year bonds strengthened to end a four-day losing streak as President Emmanuel Macron ruled out quitting if his party suffers a poor result in an upcoming legislative election.

The euro gained.

In commodities, oil extended gains after industry data pointed to shrinking US crude stockpiles, shrugging off forecasts from the International Energy Agency that markets are facing a major surplus this decade.

Key events this week:

• US CPI, Fed rate decision, Wednesday

• G-7 leaders summit, June 13-15

• Eurozone industrial production, Thursday

• US PPI, initial jobless claims, Thursday

• Tesla annual meeting, Thursday

• New York Fed President John Williams moderates a discussion with Treasury Secretary Janet Yellen, Thursday

• Bank of Japan’s monetary policy decision, Friday

• Chicago Fed President Austan Goolsbee speaks, Friday

• US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.1% as of 7:49 a.m. New York time

• Nasdaq 100 futures rose 0.1%

• Futures on the Dow Jones Industrial Average were little changed

• The Stoxx Europe 600 rose 0.6%

• The MSCI World Index rose 0.1%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro rose 0.2% to $1.0763

• The British pound rose 0.1% to $1.2759

• The Japanese yen fell 0.1% to 157.33 per dollar

Cryptocurrencies

• Bitcoin rose 0.7% to $67,782.29

• Ether rose 1.5% to $3,540.05

Bonds

• The yield on 10-year Treasuries declined one basis point to 4.39%

• Germany’s 10-year yield declined two basis points to 2.60%

• Britain’s 10-year yield declined three basis points to 4.24%

Commodities

• West Texas Intermediate crude rose 1.1% to $78.79 a barrel

• Spot gold fell 0.2% to $2,313.17 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Allegra Catelli and Subrat Patnaik.

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