The next couple of sessions may see the stock market make an attempt to regain its footing once more, even if there is a major inflation report looming ahead at the next week’s end. The last week saw stocks struggling to get ahead. Friday saw yet another sell-off in the market, which meant that the major indexes ended the week with losses. Investors were left disappointed with such performances, as they had been waiting for an upside to happen, just as it had a week before Memorial Day. Back then, there had been a 6.5% gain recorded in the S&P 500 index.
However, market strategists said that the surge of the market in late May was likely to be a setup for another sell-off that had happened. They stated that the kind of rally that had occurred in the previous week was not very different than what usually happens in price rallies in a bear market. According to the experts, the speculative aspects of the market were likely to see some countertrends, but there was a possibility that low quality trading was already over. They also think that in the uncertain environment that exists, investors need to focus more on valuation rather than value indexes.
May 20th saw the S&P 500 briefly enter a bear market, but it has not seen a decline from its high of anywhere close to 20%. But, market strategists said that the current situation is quite similar to a bear market because of the major declines that can be seen in individual stocks. Moreover, there were also no indications that stocks might move up, but there is a possibility that there could be some sharp rallies in the market as a whole. The coming week has a relatively light economic calendar. The most important reports are usually that of consumer sentiment and consumer price index, both of which were released on Friday.
The CPI for May hints that inflation may have reached its peak. As far as inflation numbers are concerned, experts believe that headline inflation year-over-year will be somewhere around 8.2%, which would be just below the 8.3% recorded in April. The breakout in the stock market in late May had given investor sentiment a boost, but the past week had seen stocks backtrack. Nonetheless, investors do appear to be a constructive for now. Back in March, the headline inflation had reached 8.5%, including energy costs and food.
But, the increase in prices of gasoline in the previous month is also going to make a difference, as will the rising cost of food and that of used cars. Market analysts said that everyone is hoping that inflation has already reached its peak because they want the Federal Reserve to hit pause on their continuous tightening of the monetary policy. Loretta Mester, the President of Cleveland Fed, said on Friday that they do not believe inflation has hit its peak and they would need to increase interest rates multiple times to deal with it.