S&P 500 Advances Toward Highest Since April 2022

The stock market kept its bullish momentum as traders geared up for a pause in one of the Federal Reserve’s most-aggressive tightening campaigns in decades.

While the advance in the S&P 500 was mild, it was enough to drive the gauge above 4,300 and toward its highest since April 2022.

Big tech led gains on Monday as Tesla Inc. climbed for a 12th consecutive session — poised for a record winning run — and Oracle Corp. rallied 6% ahead of its earnings report. Another slide in oil reduced concern about further inflation.

In the run-up to the Fed’s rate decision, Tuesday’s consumer price index is expected to be one of this week’s key drivers for markets.

Economists surveyed by Bloomberg predict core inflation, excluding food and energy, moderating to 5.2% from a year earlier.

To David Kelly at J.P. Morgan Asset Management, the Fed should weigh progress on inflation against the risk of recession in its June meeting.

“The numbers just won’t support any further tightening, and this will become clearer in the next few weeks,” Kelly said. “If so, the investment environment could support lower long-term interest rates, a lower dollar and further gains in stock prices, as investors no longer have to fight a Fed that no longer has to fight inflation.”

U.S. consumers’ near-term inflation expectations fell last month to the lowest level in two years as their outlook for personal finances and credit conditions worsened, according to a Fed Bank of New York survey.

The Federal Open Market Committee will keep rates steady at its June 13-14 meeting at the 5%-5.25% range, though officials face a closer call in July on what to do, according to economists surveyed by Bloomberg.

‘Hawkish Skip’

A “hawkish skip” would only buy the Fed a little bit of time, according to Neil Dutta at Renaissance Macro Research.

“If the Fed decides to skip the June meeting, as I anticipate, I don’t think they have a choice but to sound hawkish given their data-dependent pledge,” Dutta added.

Prospects for a pause in rate hikes helped the S&P 500 enter a bull market last week after gaining 20% from its October low. Wall Street’s top strategists are split on the way forward.

Goldman Sachs Group Inc.’s David Kostin expects the gains to continue as other sectors catch up with the searing rally for technology shares.

Morgan Stanley’s Michael Wilson, meanwhile, points instead to the bear market of the 1940s, when the S&P 500 rallied 24% before returning to a new low.

Elsewhere, oil fell amid persistent concerns around the demand outlook as Goldman Sachs cut its price forecast again. Bitcoin dropped as last week’s regulatory crackdown by the U.S. Securities and Exchange Commission weighed on sentiment.