The stock market closed green last week as the S&P 500 hit the elusive 6,000 mark, driven by a broad rally following May nonfarm payroll (NFP) numbers, which showed 139,000 jobs added and the unemployment rate holding at 4.2%.
While the headline figures eased fears of an immediate slowdown, deeper indicators revealed signs of strain: 625,000 people left the labor force, pulling the participation rate down to 62.4%.
“There are cracks in the façade of labor market resilience,” said Scott Anderson, chief U.S. economist at BMO Capital Markets, citing ongoing policy uncertainty as a headwind.
Attention now turns to the Consumer Price Index (CPI) report due Wednesday, June 11.
Goldman Sachs expects core consumer prices to rise 0.25% month-over-month in May, pointing to a modest boost from tariffs.
They project core CPI at 2.89% and headline CPI at 2.47% on an annual basis. The increase is expected to be driven by higher food prices and mild tariff effects, though offset by declines in used car prices (–0.5%), unchanged hotel rates and airfares, and softer shelter inflation. Rent and owners’ equivalent rent are both forecast to rise 0.31%.
GS: We forecast a 0.25% increase in the core CPI in May, reflecting a modest tariff boost.
— Mike Zaccardi, CFA, CMT 🍖 (@MikeZaccardi) June 9, 2025
We see Q1 and Q2 GDP growth as distorted by measurement challenges related to swings in imports around tariff increases.
One rough solution is to average the two, which would give… pic.twitter.com/fD6LqaXlPh
Market implications
CPI figures carry serious weight for both the Federal Reserve and market expectations. A stronger-than-expected print on Wednesday could challenge the current view that the Fed will likely stay on hold, especially if policymakers hint at staying hawkish. A softer reading, by contrast, might offer markets some breathing room and lift rate-sensitive areas like tech and real estate.
Once a major drag on sentiment, tariff concerns appear to be fading. With the VIX (Fear Index) down and trade policy headlines less frequent, investors seem more focused on fundamentals like corporate earnings and inflation data.
If inflation is higher than expected, we could see a shift out of high-growth names and into more defensive sectors like energy, utilities, and consumer staples, which typically perform better when inflation expectations rise.
But if the numbers show inflation cooling or holding steady, it could spark a broad rally, with tech stocks likely leading the way.
Either way, with the market near its highs, any surprise has the potential to move things fast.
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