The Federal Reserve is set to begin a two-day policy meeting, with the key interest rate decision expected on Wednesday. Investors are not expecting a rate cut this time around, as indicated by CME’s FedWatch Tool. U.S. Treasury yields have fallen as investors await the central bank’s decision and important economic data.
This week, the consumer price index (CPI) for May will be released, followed by the producer price index (PPI) later in the week. Investors are hoping for signs of a cooling economy, which could lead the Fed to consider rate cuts sooner. Despite concerns about high rates potentially causing a recession, the economy has shown resilience. Investors will also be closely watching the Fed’s economic projections released alongside the rate decision.
In other news, Eli Lilly’s shares rose after an FDA advisory panel recommended approval for its Alzheimer’s drug, donanemab. Tesla CEO Elon Musk made headlines by threatening to ban Apple devices from his companies if Apple integrates OpenAI at the OS level. Apple responded that its integration with OpenAI is optional and mainly uses its own AI. Apple shares dipped slightly in premarket trading, while Tesla’s stock remained steady.
Investors will be looking at small business data and the CPI reading for May ahead of the Fed decision. Corporate earnings from Oracle and Rubrik are also expected after the bell on Tuesday.
Analysts at BTIG suggest that the S&P 500 may not sustain its current level, despite being more than 12% above its 200-day moving average. Traders are likely to remain cautious in the short term, given the upcoming economic data and the Fed’s decision. While potential pullbacks are possible, any signs of economic cooling could lead to a more bullish outlook in the near term.