Wall Street heads into a holiday-shortened week with investors once again juggling inflation concerns, Federal Reserve uncertainty, and a packed slate of major tech earnings, after markets recently pushed to record highs.
The main event is Thursday’s core PCE inflation report, with economists expecting a 3.3% annual reading. That level would likely keep policymakers cautious as traders continue debating the interest-rate outlook under Fed Chair Kevin Warsh.
Adding to the uncertainty, several Fed officials are scheduled to speak throughout the week. Markets are still digesting recent hawkish signals from Governor Christopher Waller, who warned that inflation is again becoming the key driver of policy and suggested the Fed’s easing bias may need to be removed.
Deutsche Bank notes that investors are increasingly even pricing in the possibility of a future rate hike rather than a cut. That shift has already helped push Treasury yields higher and weighed on rate-sensitive parts of the equity market, particularly growth stocks.
Still, some relief could come if energy prices continue to ease. Nigel Green of deVere Group said markets remain highly sensitive to any sign inflation pressures are cooling, especially after oil prices pulled back on easing geopolitical concerns.
Green argued that lower yields combined with softer energy prices would be a supportive backdrop for equities. “Tech stocks, in particular, are likely to benefit because lower bond yields improve valuations for growth companies,” Green noted. “Industrials, airlines, transport firms and consumer-focused sectors could all rally sharply if investors conclude energy disruption risks are fading.”
Earnings will be another key driver this week, with results due from Marvell Technology, Salesforce, Costco, Dell Technologies, and Snowflake. Dell in particular will be closely watched for updates on AI infrastructure demand following Nvidia’s recent results.
Meta Platforms’ annual meeting is also on investors’ radar for any updates on AI spending plans and capital returns.
On the economic front, investors will be watching for signs that the US economy is starting to cool after a run of resilient data. Wells Fargo expects consumer spending to hold up but show more strain from inflation and high borrowing costs, while forecasting a 0.4% rise in the April PCE deflator.
New home sales and jobless claims later in the week will offer further clues on whether higher rates are starting to slow activity more meaningfully.
Currency, gold, and crypto markets are also expected to stay sensitive to shifting sentiment around inflation and geopolitics, with potential for rotation back into risk assets if conditions improve.
Overall, markets remain stuck between persistent inflation risks and hopes that easing geopolitical tensions could support a renewed risk rally, setting the stage for a busy and potentially volatile week.