Mid-Week Market Minute 6.14.23

Stocks Higher; CPI Report Meets Expectations

Global stocks were notably higher in early trading this week as investors await the FOMC meeting decision following the release of the consumer price index (CPI) report for May. As of mid-week, the S&P 500 was higher by about 1.6%, while the technology-heavy Nasdaq Composite index continued its streak of outperformance, rallying another 2.4%. Overseas, international developed and emerging market stocks were both higher by about 1.2%. 

On the inflation front, this month’s CPI report showed headline inflation rising just 0.1% for the month, in line with expectations. Year-over-year, prices increased 4%, representing the lowest reading in two years. With that said, core inflation, which excludes food and energy, has proven to be much stickier. Core CPI rose 0.4% for the month, and 5.3% year-over-year. While lower commodity prices, particularly oil and gas, have helped the headline numbers soften, core inflation, and in particular services inflation, remain a key focus of the Federal Reserve.

Looking forward, the rest of the week will be all about the Federal Reserve. On Wednesday afternoon, the Federal Reserve meeting for June concludes. We believe the Fed will pause on further rate hikes but would not rule out future interest rate hikes as the labor market remains strong and as economic growth continues a positive trajectory. According to Fedwatch, markets see a 90% chance the Fed will keep rates at the current target of 5% to 5.25%, after hiking rates 10 consecutive times in previous meetings. Keys to watch for are the remarks from Fed Chair Jerome Powell following the meeting, along with an evaluation of the “dot plot” that will be updated. The dot plot is a forecast from the committee as to the rate hikes expected for the remainder of 2023 and should shed light on the Fed’s view of how quickly inflation will continue to fall.

Source: GSAM, CNBC, JPMorgan

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