The S&P 500 crept higher on Tuesday as investors awaited crucial inflation data and the unofficial kick-off of first-quarter reporting season.
With a lack of market moving catalysts, investors looked ahead to Wednesday's consumer price index for any evidence that the long, slow inflation cooldown continues.
"You're seeing renewed interest in cyclical stocks," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. "There seems to be some interest in these stocks heading into tomorrow's inflation report." On a monthly basis, analysts see headline and core CPI cooling to 0.2% and 0.4%, respectively. But year-on-year, while consensus estimates call for a significant drop in the headline number - to 5.2% from 6.0% - the core measure, which strips out volatile food and energy prices, is expected to gain heat, rising to 5.6% from 5.5%.
As inflation slowly returns to the Federal Reserve's average annual 2% target, market participants are banking on a 70% likelihood of another 25 basis point interest rate hike at the conclusion of its May monetary policy meeting, according to CME's FedWatch tool. " 25 basis point hike is probably going to happen, and is baked into stock prices," Pavlik added. "How they position it for the next meeting is key, because so many people are expecting a downturn in the economy.Beyond CPI, investors are eyeing first-quarter reporting season, which surges from the starting gate this Friday with results from three major banks, Citigroup Inc
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