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CNBC
3 days ago
- Business
- CNBC
Inflation data next week could be the first to show impact of tariffs
Next week's inflation data could be the first to show the impact of higher tariffs. Economists expect that the May readings for the consumer and producer price index — both inputs for the Federal Reserve's favorite inflation gauge later this month — could start to show a rise in goods inflation, which is sensitive to the higher levies imposed by the Trump administration on imports. The consumer price index, or CPI, for example, is expected to have held steady in May, up 0.2% from April, according to economists polled by FactSet. Excluding volatile food and energy prices, however, CPI is set to have risen 0.3% from 0.2% on a monthly basis, and to 2.9% from 2.8% year over year. "Now is really the time when we should start to see the tariff impact," said Bernard Yaros, lead U.S. economist at Oxford Economics. "It was too soon in February and in March and even in April, but May and onwards, we should definitely start to see the impact on goods prices." That could signal an erosion of consumer spending power. On balance, market watchers think the stock market can look past a one-time adjustment in pricing pressures, while a sustained uptick in inflation would add to the view that the economy faces a looming slowdown. In recent weeks, investors have tried to reconcile gaps between the hard economic data, some of which started to show cracks in the labor market before May payrolls came in stronger-than-expected, and the soft economic data, which has signaled a deterioration in consumer sentiment for months. .SPX YTD mountain S & P 500, year to date Regardless, investors are hopeful that stocks can thread the needle when it comes to tariffs. The S & P 500 is less than 3% below its all-time high, and the Magnificent Seven stocks are again appealing to traders, as confidence grows that President Donald Trump will continue to back down from the steepest proposed levies. Just this week, three strategists from major firms — Barclays , Deutsche Bank and RBC — raised their year-end forecasts for the S & P 500. On Friday afternoon, the major averages were on track for a winning week. The Dow Jones Industrial Average was ahead 1.2% this week, the S & P 500 was up by 1.5%, and the Nasdaq Composite climbed 2.2%. 'Countervailing stories' There are reasons for optimism. For one, the effective tariff rate has come down significantly, especially after both China and the U.S. signaled a willingness to come to the table in negotiating duties. Economists are forecasting a slowdown, but not a recession. Investors are hopeful productivity will shoot up as companies incorporate artificial intelligence into their businesses. But there are concerns as well. The S & P 500 is starting to look expensive, selling for roughly 21 times forward earnings, back to where it was at about the start of the year. Some tariff rates have moved sharply higher, with Trump last week raising steel and aluminum tariffs to 50% , threatening the price of everything from oil rig equipment to beer cans. Marko Kolanovic, until last summer the chief market strategist at JPMorgan, told CNBC's " Fast Money " Thursday that he expects a sell-off of 5% to 10% in stocks. Absent a recession, a 5% decline may prove a buying opportunity, he said. But if there's an increase in recession odds, then even a 5% drawdown could be too shallow. Stocks are "close to all-time highs, but we still have all the problems," Kolanovic said. "We have a trade war, we have sort of signs of economic slowdown, valuations are back to highs." Giuseppe Sette, president and co-founder at Reflexivity, is troubled by some of the forces the market appears to be overlooking. "Something doesn't feel properly priced," he said, citing recession fears, as well as the risk of an escalation in geopolitical conflicts. Still, in the very near term, he expects markets will continue to remain rangebound. He likes Treasurys and gold, in addition to stocks tied to AI. "There [are] too many countervailing stories going on," Sette said. "It's very hard to go up. But, there is enough good news to float around, and we don't have a very clear catalyst that's going to take the market and sink it down." Elsewhere next week, investors will also monitor Apple's latest developer conference. Investors are hoping features on the latest iPhone models will be exciting enough to kickstart a new cycle of iPhone sales, a potential boon for a stock that has floundered this year. One analyst, who downgraded Apple this week , worries there will be no such catalyst. Seasonally speaking, however, Apple shares often move higher at this time of year. On the economic front, investors will also watch for the NFIB small business survey, studying details on the impact of tariffs in a corner of the economy regarded as more vulnerable to steep duties than larger businesses. Week ahead calendar All times ET. June 9-13 Apple WWDC25 Monday, June 9 10:00 a.m. Wholesale Inventories final (April) 1:00 p.m. Apple WWDC25 Keynote Tuesday, June 10 6:00 a.m. NFIB Small Business Index (May) Earnings: J. M. Smucker Co. Wednesday, June 11 8:30 a.m. Consumer Price Index (May) 8:30 a.m. Hourly Earnings final (May) 8:30 a.m. Average Workweek final (May) 2:00 p.m. Treasury Budget (May) Earnings: Oracle Thursday, June 12 8:30 a.m. Continuing Jobless Claims (05/31) 8:30 a.m. Initial Claims (06/07) 8:30 a.m. Producer Price Index (May) Earnings: Adobe Friday, June 13 10 a.m. Michigan Sentiment preliminary (June)
Yahoo
05-04-2025
- Business
- Yahoo
Here's What Experts Say You Can Do To Weather the Stock Market's Tariff Tantrum
Stocks tumbled after President Trump announced sweeping tariffs on nearly all U.S. imports, a move economists warn could stoke inflation and stunt economic growth. Most analysts expect tariff uncertainty to linger while affected countries negotiate with the Trump administration or enact retaliatory tariffs. Some analysts caution against buying the current dip, but plenty note investors should take the long view and continue to invest in companies with strong plummeted after President Trump unveiled steep and far-reaching tariffs that economists warn could raise prices and slow economic growth. Following the late-Wednesday announcement of the new trade measures, the S&P 500 tumbled 10.5% across Thursday and Friday, the index's worst 2-day stretch since March 2020 and its third-worst since the turn of the century. Uncertainty about the size and scope of tariffs has weighed on the stock market ever since Trump returned to the White House in January. Investors had been hoping that this week's tariff announcement—dubbed 'Liberation Day' by Trump—would finally offer businesses and investors the clarity they've been looking for. Instead, Trump's "reciprocal" tariffs perplexed economists and amplified confusion on Wall Street. The tariff rates that were announced were also higher than most observers expected. 'We have to assume this is the start of a negotiation and these rates will not hold,' Wedbush analysts wrote in a note on Thursday. Bernard Yaros, lead U.S. Economist at Oxford Economics agreed, saying that the staggered tariff deadlines—April 5 for a 10% universal tariff and April 9 for country-specific tariffs—suggested there was 'some room for countries to negotiate.' It appears, then, that tariff uncertainty will be hanging over the stock market for a while longer as countries negotiate with the Trump administration or hit back, as China did on Friday, with retaliatory tariffs of their own. 'Risk-off positioning is the most prudent posture to take in the face of so much uncertainty,' says Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management. He notes that what lies ahead—the White House's deregulation push, tax cut extensions, tariff rates negotiated lower—is likely to improve investor sentiment. However, 'it is going to take some time to recover from the damage that is being done to business and investment confidence.' 'Stocks should stabilize once negotiations start to bear fruit and take rates down, assuming it's clear to markets that no meaningful tariff rates will be increased further because of retaliation,' says Jeff Buchbinder, Chief Equity Strategist for LPL Financial. Most analysts agree with the adage: Time in the market beats timing the market. 'Investors should stay focused on their long-term goals,' says ProShares Global Investment Strategist Simeon Hyman. 'Pullbacks are natural after years of extended gains, and in hindsight, often represent a buying opportunity—particularly in high-quality companies with stable earnings.' Shawn Tuteja, head of custom basket and ETF volatility trading at Goldman Sachs Global Banking & Markets suggests using relief rallies to trim market exposure, 'and then on dips, look to scale into companies that you can believe in the fundamental story and hold long-term.' Others, however, caution against buying the dip just yet. Adam Turnquist, LPL Financial's Chief Technical Strategist, notes that corrections tend to trough when fewer than 10% of S&P 500 stocks are trading above their 20-day moving average; as of Thursday's close, about 30% of the index was still above that threshold. He also points out that muted demand from institutional investors during Thursday's sell-off suggested stocks had further to slide, which they did on Friday. 'Overall, the weight of the technical evidence continues to suggest caution on buying this dip.' Read the original article on Investopedia Sign in to access your portfolio
