Market Sentiment Shifts as Inflation Data Looms

Market Overview - June 9, 2025

As the week ended, financial markets displayed a cautiously optimistic sentiment following a series of heated headlines emerging from Washington D.C. The stock indices closed the week positively; the S&P 500 surged by 1.5%, while the tech-heavy Nasdaq 100 outperformed with a 1.9% increase.

This upward momentum extended to the bond market, where yields on ten-year and two-year Treasuries saw rebounds of 2.5% and 3.5%, respectively. Meanwhile, crude oil, sensitive to economic cycles, soared by 6.2%, reaching a six-week high. Additionally, currency markets indicated pro-growth sentiments, evidenced by a rising euro and a declining Japanese yen against the US dollar.

Looking Ahead: Inflation on the Radar

As the economic calendar presents crucial data next week, traders are contemplating whether the economy can sustain its upward trajectory without the Federal Reserve's intervention. Notable attention is directed towards the consumer price index (CPI) data, which is projected to reveal an increase in inflation to 2.5% year-on-year for May, up from 2.3% in April. Particularly significant is the core inflation figure, excluding food and energy, anticipated to rise to 2.9%, marking its highest level in three months.

This data is poised to solidify expectations for inaction from the Federal Reserve in the near term, as market insights reveal a firm dismissal of interest rate hikes in both June and July. Futures in Fed Funds are estimating at least one 25-basis-point increase by October, with a 60% likelihood of another before the year concludes.

Consumer Confidence and Economic Indicators

Further insight will be gained with the forthcoming report from the University of Michigan on consumer confidence, which is expected to show a slight uptick following a three-year low in April. Such an improvement could reflect buoyant expectations amid a climate of deepening pessimism concerning current conditions.

Consumption remains a critical element of the US economy, constituting more than 68% of gross domestic product (GDP). However, the first quarter faced challenges, displaying the weakest contribution to total output in nearly two years, as evidenced by underwhelming retail sales and rising unemployment claims.

If general sentiment continues to trend downward, it suggests a potential drift toward recession. Coupled with a central bank that appears resistant to aggressive intervention, this dynamic could exert negative pressure on both stocks and the US dollar, while potentially boosting the prices of bonds and gold.

Individual Stock Highlights

On the corporate front, significant earnings reports are lined up. GameStop is expected to announce its Q1 earnings today with an EPS estimate of $0.08, while Oracle will report after the bell on June 11, with expectations resting on robust cloud service demand amid a backdrop of strong quarterly sales.

Market Reaction and Key Levels

As markets navigate this week, inflation data’s role will be pivotal. With the S&P 500 approaching the crucial 6,000 level, traders will keenly monitor market responses surrounding inflation figures and the reactions to earnings from major tech companies. A positive inflation report could reignite concerns about rate hikes, influencing market direction significantly.

In the wake of these developments, market participants should remain alert for potential volatility in response to forthcoming economic data releases and corporate earnings disclosures.