Inflation Data Fuels Stock Market Rally with Potential for Further Gains

Inflation Continues to Ease, Boosting Market Sentiment

• The latest inflation data has provided a significant boost to the stock market, with the S&P 500 and Nasdaq hitting four straight record closes.
• Economists believe inflation is showing its most significant progress toward the Fed's 2% goal since the start of the year.
• Softer-than-expected CPI and PPI readings have fueled hopes for rate cuts, sending Treasury yields lower and boosting investor confidence.

Analysts Raise Year-End Price Targets

• Julian Emanuel of Evercore ISI has raised his year-end price target for the S&P 500 to 6,000 from 4,750, citing the promising inflation path and early stages of AI adoption.
• UBS chief US equity strategist Jonathan Golub believes the inflation data provides the potential for even greater upside to his year-end outlook of 5,600.
• Analysts are increasingly confident that inflation is on a downward trend, which could lead to rate cuts and support the stock market rally.

Rate Cuts on the Horizon?

• Economists expect a positive reading of the Fed's preferred inflation gauge in the Personal Consumption Expenditures (PCE) index later this month.
• Bank of America predicts that core PCE increased by 0.16% month over month in May, suggesting that the Fed may consider reducing its policy rate later this year.
• The recent inflation data has increased market expectations for two interest rate cuts in 2024, fueling optimism among investors.

Inflation Data	May Reading	Economist Expectations
Core CPI	0.2%	0.3%
Core PPI	0.0%	0.3%
Personal Consumption Expenditures (PCE)	0.16% (estimated)	N/A