After April’s disappointing jobs report, market focus will shift squarely to inflation in the week ahead.
The tug-of-war over tech stocks will also continue to be a dominant force in the stock market, after Friday’s bounce more than halved the week’s losses in the S&P technology sector.
The April employment report was extremely disappointing with just 266,000 jobs created, well below the 1 million expected. The Friday report cast doubt on the expectations of some investors that the Fed will move toward paring back its so-called quantitative easing bond purchases later this year.
The thinking is if the inflation data appears hot when the consumer price index is reported Wednesday, it could ignite the debate about whether the Fed will have to tighten policy sooner than it would like. For now, the market is viewing the April jobs data as a distorted one-off report.
“It’s all about the inflation numbers. It’s all about the transitory nature and to what extent we’ll see it,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group “It’s more relevant to the CPI month-over-month changes. If the month-over-month gains are starting to pick up steam, and we’re seeing 0.3% to 0.4%, that’s not transitory and that’s a problem for the Fed.”
