US stocks edge toward records with inflation data in focus
New York
The US stock rebound has driven key indexes to the cusp of record levels, with fresh economic data and trade and fiscal policy developments set to test whether equities will get an extra push higher in thenear term.
A monthly US inflation report headlines the events for markets in the coming week.
Equities have bounced back from a steep fall in April, sparked by concerns about the economic fallout from President Donald Trump's tariff plans. Stocks ended the week on a high note, with the S&P 500 closing on Friday above 6,000 for the first time since late February, buoyed by a monthly US jobs report that calmed worries about theeconomy.
The benchmark S&P 500 ended on Friday 2.3 percent off its record closing high from February. 'I'd still say it's a cautious tone' in the market, said Jim Baird, chief investment officer with Plante Moran Financial Advisors. Despite a 'recovery off the lows, I still think it's a market that is looking for greater clarity.'
Some uncertainty stems from how the US economy is weathering the shifting trade backdrop. Trump has eased back on some of the harshest tariffs since his April 2 'Liberation Day' announcement sent stocks tumbling, but investors are waiting to see how other levies may be rippling through the economy.
The consumer price index report for May, due on Wednesday, could give insight into the tariff impact at a time investors are wary of any flare-ups in inflation.
'Consumers are feeling the impact of higher prices and if there are indications that near-term inflation could re-accelerate, that is going to put further pressure on discretionary spending and ultimately could lead to a more pronounced slowdown in growth,'Baird said.
The CPI report will be one of the last key pieces of data before the Federal Reserve's June 17-18 meeting. The US central bank is widely expected to hold interest rates steady at that meeting, but traders are pricing in nearly two 25-basis point cuts by the end of the year.
'If we see inflationary data that defies what people are concerned about based on this tariff talk and it comes in cooler, then that could also be a catalyst to at least test those old highs,' said Jay Woods, chief global strategist at Freedom Capital Markets.
US stocks closed higher on Friday, with the Dow and S&P 500 gaining 1 percent and the Nasdaq climbing 1.2 percent.
For the year, the S&P 500 is up 2 percent. But the index has stormed back over 20 percent since April 8, at the depth of the stock market's plunge on concerns over the tariff fallout.
Investors also are grappling with uncertainty over a sweeping tax-cut and spending bill under review in the US Senate. Wall Street is monitoring how much the legislation could stimulate economic growth, but also inflate the country's debt burden as widening fiscal deficits have become a central concern for markets in recent weeks.
'As debt increases, it has a greater negative impact on growth,' said Kristina Hooper, chief market strategist at Man Group. The legislation also appeared to be the source of a severe rift between Trump and Tesla chief Elon Musk, which weighed on stock indexes. Former Trump ally Musk called the bill at the heart of Trump's agenda a 'disgusting abomination,' while Trump said he was 'disappointed' by the billionaire's public opposition.
Trade talks also remain at the forefront of markets, with a 90-day pause on a wide array of Trump's tariffs set to end on July 8. Trump said on Friday three of his cabinet officials will meet with representatives of China in London on Monday to discuss a trade deal.
'When it comes to policy from Washington, there are still big question marks,' said Bob Doll, chief investment office at Crossmark Global Investments.
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