Stocks Rise Ahead of Key Economic Data and Earnings Reports; Fed Rate Cut Expectations Increase as Inflation Slows

Based on the latest information, US stocks are rising ahead of key economic data scheduled for release this week, with investors closely watching the Consumer Price Index (CPI) update for April. While recent hot inflation data has made markets more cautious, many believe that the report will indicate a faster descent and pave the way for more than one interest rate cut this year. Major companies including Home Depot, Walmart, Cisco, and Alibaba are also set to report this week. The renewed slowdown in inflation is likely to increase hopes for Fed rate cuts, leading to inflows into risk assets like cryptocurrencies. However, despite recent gains, the labor market’s impact on inflation remains a concern, with some arguing that the economy’s growth should not be too fast as it could lead to wage pressures. Investors are also closely monitoring the annual Upfront presentation by Netflix, during which the company is expected to update its subscriber numbers and discuss its sports strategy. In corporate news, Walmart’s stock has underperformed the S&P 500 in the past month due to concerns over sticky inflation, but EvercoreISI’s retail analyst believes the company is executing well and is adding it to his tactical buy list ahead of its earnings report. JP Morgan’s May investor day is also generating interest, with Jefferies analyst Ken Usdin sticking with a buy recommendation and raising his price target due to expectations of market share gains, investment spending, and efficiency. However, Goldman Sachs predicts that inflation will remain above the Fed’s target in 2024 due to rebalancing in the auto, housing rental, and labor markets, although there will be disinflation in certain areas. Overall, the Dow Jones Industrial Average has enjoyed its best week of the year, and the S&P 500 and the Nasdaq Composite have also recorded gains in the past few weeks.