How long will the stock market rally last... CPI and US-China summit in focus

U.S. President Trump (left) and Chinese President Xi Jinping

This week (May 11-May 15, U.S. Eastern Time), the New York stock market is expected to move primarily based on the Consumer Price Index (CPI) and the U.S.-China summit.

First, the U.S. April CPI, to be released on the 12th, is highly likely to fully reflect the impact of the sharp rise in oil prices due to the war.

The market predicts that April CPI will rise by 0.6% compared to the previous month and 3.4% compared to the same period last year. Core CPI, excluding volatile oil and food prices, is estimated to rise by 0.4% compared to the previous month.

The White House is also considering the possibility of a high April CPI.

Peter Navarro, White House Trade and Manufacturing Advisor, wrote in a Real Clear Markets op-ed the day before that "energy and gasoline prices, airfares, and technical measurement effects could temporarily push up headline inflation."

Kristina Hooper, Chief Market Strategist at Man Group, predicted, "If core CPI comes out significantly higher than expected, it will be a big problem for the market."

The April Producer Price Index (PPI), to be released the day after the CPI announcement (13th), is also cited as an important indicator. PPI is estimated to have risen by 0.4% compared to the previous month.

In particular, it is necessary to pay attention to the detailed items of PPI, such as airfares, portfolio management fees, and hospital bills, which affect the Personal Consumption Expenditures (PCE) price index, a inflation indicator used by the Federal Reserve (Fed).

The April retail sales, to be announced by the U.S. Department of Commerce on the 14th, should also be monitored. The key is how strongly U.S. consumption can continue. The consensus is a 0.5% increase compared to the previous month.

James Ragan, Co-Chief Investment Officer (CIO) at D.A. Davidson, explained, "Although oil prices have fluctuated somewhat and fallen from their peak, gasoline prices across the U.S. continue to rise. There isn't much evidence yet that it's significantly harming consumption, but it's certainly becoming a larger component of household budgets."

U.S. Hypermarket

In addition to economic indicators, several major events are scheduled for this week.

President Donald Trump will visit China from the 14th to the 15th. A summit meeting with Chinese President Xi Jinping is also scheduled.

The most captivating topic is the potential war between the U.S. and Iran. If an agreement with Iran fails before the summit, President Trump is expected to seek China's active involvement. China is considered to have significant influence as the largest importer of Iranian crude oil.

Scott Ladner, Chief Investment Officer (CIO) at Horizon Investments, explained, "The market viewed this U.S.-China summit as a kind of deadline. If the strait remains closed even by the time of the summit, the market will have to price in a much longer period of impact."

According to U.S. internet media Semaphor, President Trump requested CEOs of major U.S. companies, including Nvidia, Apple, Qualcomm, and Boeing, to accompany him. Related discussions are also of interest. In addition, issues such as rare earth and soybean imports, and energy import issues are expected to be on the agenda.

Looking solely at the market, it remains to be seen how long the Artificial Intelligence (AI) rally will continue.

The S&P 500 index and the technology-heavy Nasdaq Composite index are currently at all-time highs. Hooper, the chief market strategist, assessed, "There has been a tremendous rebound as the market tries to focus only on positive factors."

According to JPMorgan, individual investors who had been on the sidelines for the first month of the war have recently actively returned to the market. They are focusing on stocks related to AI, semiconductors, and data storage.

JPMorgan's trading desk predicted that mega-cap tech stocks would continue their recent momentum ahead of Nvidia's earnings announcement scheduled for the 20th.

New York Stock Exchange Trader

◇Key Schedule and Speeches

- May 11

April Existing Home Sales

Corporate Earnings Announcement: Constellation Energy

- May 12

ADP Weekly Employment Change (4-week average)

April National Federation of Independent Business (NFIB) Business Optimism Index

April Consumer Price Index (CPI)

Speech by John Williams, President of the Federal Reserve Bank of New York (FRBNY)

Speech by Austan Goolsbee, President of the Federal Reserve Bank of Chicago

Corporate Earnings Announcement: Zebra Technologies

- May 13

April Producer Price Index (PPI)

Speech by Susan Collins, President of the Federal Reserve Bank of Boston

Speech by Neel Kashkari, President of the Federal Reserve Bank of Minneapolis

Speech by Lorie Logan, President of the Federal Reserve Bank of Dallas

Corporate Earnings Announcement: Cisco Systems, Qunity Electronics

- May 14

U.S. President Donald Trump visits China (~15th)

Weekly Unemployment Claims

April Import/Export Prices

April Retail Sales

Speech by Beth Hammack, President of the Federal Reserve Bank of Cleveland

Speech by Williams, President of the Federal Reserve Bank of New York

Speech by Michael Barr, Governor of the Federal Reserve (Fed)

Corporate Earnings Announcement: Applied Materials

- May 15

May New York Empire State Manufacturing Index

April Industrial and Manufacturing Production