The S&P 500 is grinding against 6,000 and can’t break through. The index has surged 20% since April but is now stalled just 2.3% below its all-time high.
Traders are holding their breath ahead of the consumer price index (CPI) data due Wednesday and the Federal Reserve’s interest rate decision set for June 18. According to Asym 500, this double-whammy is all anyone is watching right now.
The calm has been unnatural. For seven straight sessions leading into Friday, the S&P 500 moved less than 0.6% in either direction — the quietest stretch since December. That’s not normal for a market this close to record highs. But despite solid earnings and no major signs of recession, everyone knows this silence might not last.
Traders wait for data, prep for fallout
Eric Diton, president and managing director of Wealth Alliance, says the rally can’t keep going unless there’s less uncertainty. “For US stocks to get back to all-time highs, we have to get rid of uncertainty, but most catalysts are elusive for now until the trade war chaos is resolved,” he said. His firm is already hedging against a possible drop.
The data coming in hasn’t helped. May saw a slowdown in US job growth. Manufacturing and services activity dipped. But markets don’t care. Everyone’s betting the damage from Trump’s trade war won’t hit too hard. That’s helped the Nasdaq 100 stay just 1.9% from its record. Still, some traders are nervous.
Inflation is expected to rise. The May CPI is forecast to show a 0.3% monthly increase in core prices, higher than the 0.2% reported in April. That would push the year-over-year reading to 2.9%, way above the Fed’s 2% goal. Wells Fargo economists say inflation will climb even faster later this year.
Some traders think this could force Fed Chair Jerome Powell to cut rates in September. But others say rising inflation or sudden volatility could crush riskier trades. And that fear is building just under the surface.
The S&P 500 is also trailing global stocks by a lot. It’s underperforming the MSCI All Country World Index (excluding the US) by nearly 12 percentage points so far in 2025 — the worst relative start since 1993. Michael Hartnett, a strategist at Bank of America, says investors are too loaded up on risky bets, and the setup looks close to triggering a technical selloff.
Inflation pressure builds as volatility returns
Traders are still glued to the big macro events. Data from Asym 500 shows that in the last three months, S&P 500 volatility jumps to 42% on days with CPI, Fed, or jobs data, compared to just 29% on all other days. These reports move markets, and everyone knows it.
Over the last two months, fund managers have dumped cash and gone all-in on US equities. But that rush has left them without much protection. If CPI comes in hot on Wednesday, the market could get caught with its pants down.
Pursche says that’s exactly the problem. “I fear many are not paying attention to these threats because most are thinking ‘everything will be fine,’ but they’re ignoring warning signs,” he said. This kind of blind optimism is exactly what makes traders anxious.
Deutsche Bank says rules-based and discretionary traders are still holding fewer stocks than usual. So, technically, they could still buy more. The wildcard now is the lag effect of tariffs. No one really knows when or how they’ll start hitting inflation numbers.
Brooke May, managing partner at Evans May Wealth, says people might be underestimating that risk.
“We’ve become desensitized with inflation because everyone is betting that it will take months before tariffs will flow through into the economic data,” she said. “But if there’s a hot CPI print, it could lead to another selloff in stocks, though will investors use any drawdown to keep buying the dip, or sell?”
That’s the big question. Will traders treat a dip as a buying opportunity or get spooked and start running for the exit?
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