Wall Street is clearly in waiting-on-the-Fed mode, but optimism is growing that the Fed might end up being done with their rate hiking cycle. The data-dependent Fed has locked themselves into a skip, and that seems to be mostly priced in. Even if we get a somewhat hot inflation report next week, they are likely to keep rates steady at the June 14th meeting.
Now that we are seeing weakness in the service sector and overall softness is emerging in the labor market, we should anticipate that the inflation numbers are going to start to look a lot better given the base effects. There is a chance that data could warrant a pause at the July meeting, which might mean Wall Street might think we are done with rate hikes.
US stocks are rising after a decent jump in jobless claims cooled some Fed rate-hiking bets. The economy is slowing down and if we get further signs that the labor market is cooling, that could be enough for the Fed to pause tightening throughout the summer
US Data
Jobless claims have risen to the highest levels since October 2021. Weekly jobless claims posted an increase of 28,000 claims, bringing the total to 261,000 claims. The Memorial Day shortened week may have impacted this data, but given all the corporate layoff announcements we have been hearing, we might need next week to confirm the weakening trend.
All eyes will be on next week’s inflation report and that should the disinflation process is in place but shelter costs are keeping core CPI sticky.
S&P 500 Index
