What to know this week

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Inflation will take top billing in the week ahead for the first full trading week of June.

Investors will get the latest gauge on how quickly prices are rising across the U.S. when the Bureau of Labor Statistics releases its latest Consumer Price Index Friday.

The measure will come as Federal Reserve policymakers hasten to rein in near 40-year-highs in inflation with interest rate hikes — while stoking worries the measures may temper economic growth.

Underscoring that likeliness – and the possibility that the Fed’s rate-hiking campaign will continue beyond the next two meetings – was Friday’s May employment data.

The Labor Department’s jobs report reflected a slightly slower pace of hiring from April, with 390,000 jobs added to the U.S. economy in May, though overall job growth remains robust on a historical basis.

“Overall, the jobs report reinforces the strength of the overall economy, but also indicates the Fed still has their work cut out for them and may need to continue 50 basis point rate hikes through the autumn months,” Charlie Ripley, senior investment strategist at Allianz Investment Management said in a note.

These concerns led all three major indexes lower Friday to eke out another weekly loss after a temporary rally tailed off in a volatile holiday-shortened four days of trading.

“The jobs release sent affirmation to investors that the recovery continues in full force,” Peter Essele, Head of Portfolio Management at Commonwealth Financial Network, said in a note. “The flip side to that coin, however, is that inflation will continue to be an issue due to strong demand from consumers, wage pressures, and rising commodity prices.”

The headline CPI index is expected to have climbed in May but stay flat from last month’s reading on a year-over-year basis. Economists forecast the broadest measure of CPI rose by 8.3% in May, on par with April’s advance. Over the month, CPI is expected to show an increase of 0.7%, up from 0.2% last month.

The core measure of the index, which excludes volatile food and energy prices, likely decelerated to 0.5% on a monthly basis from 0.6% in April, and 5.9% annually from 6.2% the prior month.

“The rate of inflation moderated a bit in April and we’ll need to see this followed up by more slowing in May to underscore the notion that inflation has peaked,” Bankrate Chief Financial Analyst Greg McBride said in emailed commentary. “Even then, it will take many months of more moderate price readings for the rate of inflation to come down in a meaningful way.”

That sentiment has been shared among Federal Reserve policymakers as of late, including Vice Chair Lael Brainard. On Thursday, the central bank’s now No. 2 official said signaled half-percentage-point increases in interest rates this month and next were likely, along with continued tightening afterward.

“Right now it’s very hard to see the case for a pause,” Brainard told CNBC in an interview Thursday. “We’ve still got a lot of work to do to get inflation down to our 2% target.”

Fedspeak will hit a lull as officials enter a blackout period ahead of their next policy-setting meeting, set to take place June 14-15. A half percentage point interest rate hike appears likely to be announced following this discussion.

U.S. President Joe Biden meets with Federal Reserve Chair Jerome Powell and U.S. Treasury Secretary Janet Yellen to talk about the economy in the Oval Office at the White House in Washington, D.C., U.S., May 31, 2022. REUTERS/Leah Millis

Outside of Friday’s CPI print, investors are in for a light economic and earnings calendar next week, but volatility is expected to persist as Wall Street braces for tighter financial conditions and weighs a U.S. economy in limbo.

All while government data shows a sharp contrast from what some corporate leaders see ahead.

Tesla (TSLA) CEO Elon Musk warned of a “super bad feeling” about the economy, saying the company is expected to trim about 10% of jobs in an email to executives, Reuters reported Friday, while also motioning management to “pause all hiring worldwide.”

The comments echo remarks from JPMorgan Chase (JPM) boss Jamie Dimon, who cautioned of a “hurricane” bearing down on the U.S. economy and a weaker outlook reported by tech bellwether Microsoft (MSFT), which more specifically cited foreseen disruptions from volatility in currencies.

Not all are convinced these warnings indicate an economy close to rolling over. As Greg Daco, chief economist at EY-Parthenon, told Yahoo Finance on Friday, May’s jobs data suggests this drumbeat of doom and gloom ahead is “misleading” in the context of a still-growing labor market.

“While the economy will undoubtedly slow in the coming months, anecdotal evidence of hiring freezes and layoffs at tech companies is misleading with overall job openings still near record-highs and layoffs at record-lows,” Daco said.

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Economic calendar

Monday: No notable reports scheduled for release.

Tuesday: Trade Balance, April (-$89.2 billion expected, $108.9 billion during prior month); Revisions: Trade Balance; Consumer Credit, April ($32.750 billion expected, $52.435 billion during prior month)

Wednesday: MBA Mortgage Applications, week ended June 3 (-2.3% during prior week); Wholesale Trade Sales, month-over-month, April (1.7% during prior week); Wholesale Trade Inventories, month-over-month, April final (2.1% expected, 2.1% during prior week)

Thursday: Initial Jobless Claims, week ended June 4 (200,000 during prior week); Continuing Claims, week ended May 28 (1.309 million during prior week); Household Change in Net Worth, 1Q ($529.7 billion); Bloomberg June United States Economic Survey.

Friday: Consumer Price Index, month-over-month, May (0.7% expected, 0.3% during prior month); Core CPI, month-over-month, May (0.5% expected, 0.6% during prior month); Consumer Price Index, year-over-year, May (8.3% expected, 8.3% in during prior month); Core CPI, year-over-year, May (5.9% expected, 6.2% during prior month); Real Average Hourly Earnings, year-over-year, May (-2.6% during prior month), Real Average Weekly Earnings, year-over-year, May (-3.4% during prior month), University of Michigan Sentiment, June preliminary (58.7 expected, 58.4 during prior month); Monthly Budget Statement, May ($308.2 billion during prior month)

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