Key insights
- The upcoming release of the PCE price index is a key focus, as it will provide the first major inflation reading since the Fed signaled a potential rate hike before 2027. Given the Fed's hawkish stance and the PCE's role as a precise inflation measure, a higher-than-expected reading could reinforce expectations of tighter monetary policy, negatively impacting US equities. Additionally, Micron Technology's earnings will offer insight into the AI sector's demand, which could influence tech stock performance.
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Economists will update the Fed's preferred inflation index this week, giving investors a chance to see how the latest reading squares with the newly hawkish central bank.1
The May output of the Personal Consumption Expenditures price index is due Thursday. The Fed sees the PCE as a more precise measure of price changes because it uses surveys of businesses, rather than consumers, to weigh a broader set of data. The PCE price index rose 3.8% year-over-year in April—well above the 2% target, and the largest increase in three years.
It'll be the first major bit of inflation data since Fed officials last week indicated that they envision lifting the central bank's benchmark rate by a median of a quarter-percentage-point before 2027. Officials haven't adjusted the federal funds rate since December. Raising the rate is the main way the Fed fights inflation; by ushering in higher interest rates, it can slow spending and temper price growth.
Investors may pay more attention to the PCE and other economic indicators, now that the head of the Fed wants it to say less about forecasts.
This week may also provide insight on the state of the AI play. Memory-chip maker Micron Technology—whose products are used in AI data centers—will release results Wednesday.2 Micron shares have vaulted higher with investors convinced that the AI buildout will fuel demand: Micron's market capitalization has hit $1 trillion, and its shares are up more than 800% this year through last week's close.
The major U.S. stock indexes finished the week higher, despite lagging Wednesday when the Fed signaled a rate hike may be coming, as optimism about a U.S.-Iran reconciliation lifted investors' mood and increased the possibility that regular flows of ships and goods through the Strait of Hormuz might be restored. The S&P 500, Nasdaq Composite and Dow Jones Industrial Average all logged gains Thursday, the final trading day of a holiday-shortened week. For more, read our market round-up here.
Here's a look at major events in the week ahead. TradingView publishes a more detailed calendar, but clicking the link will take you off the Investopedia site.
The SpaceX IPO has pushed attention to index funds, which may soon begin adding its shares, Crystal Kim reports. A study found AI tools tend to suggest riskier investments and tech-heavy portfolios, Trina Paul writes. Improved U.S.-Iran relations may revive investors' fervor for gold, Crystal Kim reports. Finally, here's Diccon Hyatt's report on what the Fed's latest decision could mean for your finances.