U.S. stocks were indicated to see muted moves on Tuesday, with the S&P 500 index and Nasdaq Composite inching toward further records, as investors awaited a report on producer prices and a report on retail sales due at 8:30 a.m. Eastern Time.
The Federal Reserve is set to kick off a policy meeting Tuesday also, concluding Wednesday afternoon, which hedge-fund pro Paul Tudor Jones referred to as one of the most important central bank meetings of the past four years, with investors fixated on the inflation outlook.
How are stocks benchmarks performing?
On Monday, the Nasdaq Composite
COMP,
The Dow
DJIA,
What’s driving the market?
Central bankers and investors on Tuesday will parse data on U.S. retail spending and producer prices, looking for further evidence of rising inflation.
Investors will watch for May retail sales which are expected to rise 0.5%, after a 0.8% fall the previous month. The May producer-price index, or prices paid to producers, are expected to rise 0.5%, according to Dow Jones and MarketWatch. The core PPI, excluding volatile foods and energy prices, is estimated to increase 0.4%.
So far the U.S. stock market has been trading as if higher inflation in the recovery phase from the COVID pandemic will be a short-lived phenomenon, caused temporarily by easing of economic restrictions and supply-chain bottlenecks.
The big fear is that the Fed will be forced to scale back its bond-buying program sooner than its initial projections and eventually lay the groundwork for raising benchmark interest rates, which currently stand at a range of 0% to 0.25%.
A survey of global fund managers conducted by Bank of America found that nearly three-quarters of participants think the current spike in consumer prices will recede soon.
However, some prominent financial professionals aren’t so sanguine. On Monday, at a conference, JPMorgan Chase
JPM,
“But I do expect you are going to see higher rates and more inflation today.”
Separately, Paul Tudor Jones in a CNBC interview Monday morning said that that Fed policy makers are in danger of making a substantial policy mistake by treating rising price pressures as a transitory, or short-lived.
A report on manufacturing activity in the New York state area also is also due at 8:30 a.m.
In other economic reports, the May industrial production is also due at 9.15 a.m. and is expected to rise 0.5%. The National Association of Home Builders’ housing market index for June is due out at 10 a.m., at the same time as data on business inventories for April.