US Stock Markets Show Mixed Dynamics Ahead of Inflation Data
Investors are cautious ahead of key macroeconomic data releases, reflected in the volatility of NYSE and NASDAQ indices.
Mixed Dynamics in US Markets: The Calm Before the Inflation Data Storm
The Core: What's Really Happening
What we've been seeing on US exchanges in recent days is not the usual consolidation before important data. It's a lull that masks a tectonic shift in monetary policy that most retail investors haven't yet grasped. The S&P 500 and Nasdaq are showing nervous mixed dynamics not because the market is "waiting" for inflation statistics. The market has already made its decision, and it's not in favor of buyers.
Behind the scenes, a reassessment of the entire spectrum of risk premiums is underway. The Fed, under new Chair Kevin Warsh, has executed a "hawkish pivot" that markets have interpreted as a paradigm shift, not a routine meeting. Money markets have fully priced in a rate hike by October—an aggressive timeline that no major player expected just a week ago. This means the current mixed dynamics are not "waiting" but "digesting" the shock.
Insider perspective: note the divergence between index behavior and the yield on two-year Treasury notes. A 16 basis point rise in one meeting is an anomaly that only occurs during a policy regime change. The spread between 2-year and 10-year notes continues to invert, but now it's not just a recession signal—it's a direct indication that the Fed is willing to sacrifice economic growth for price stability. Most commentators miss that Warsh publicly called inflation a "choice," not an inevitability. This is not just rhetoric—it's the methodological foundation for future decisions.
Timeline and Context
To understand the depth of what's happening, we need to reconstruct the chain of events over the past two weeks. On June 10, inflation data came out: annual CPI accelerated to 4.2% from 3.8% the previous month. This was the first warning, but markets attributed the rise to energy factors and temporary effects. Then, on June 15, an event that should have calmed nerves: the US and Iran reached a preliminary agreement to end the war and open the Strait of Hormuz. Oil crashed nearly 5%, the Dow Jones hit an all-time high, and the Nasdaq surged 3%.
But that rally turned out to be a trap for bulls. On June 17, the first Fed meeting under Kevin Warsh took place, and it changed everything. The rate was left unchanged at 3.5-3.75%, but that was a formality. The key was the updated "dot plot," which showed that nine out of 19 committee members expect at least one rate hike by the end of the year, and six of them expect two hikes of 25 basis points each. In March, none of the policymakers had factored a hike into their forecasts. A 180-degree turn occurred in three months.
At the same time, the Fed sharply raised its inflation forecast: the expected PCE level for end-2026 jumped from 2.7% to 3.6%, and core PCE from 2.7% to 3.3%. This means the regulator acknowledged that inflation is settling at a persistently high level, not a temporary phenomenon. In response, two-year government bonds plummeted, with yields surging above 4.21%—the highest levels since the start of the year.
| Indicator | March 2026 (forecast) | June 2026 (forecast) | Change |
|---|---|---|---|
| PCE inflation (end 2026) | 2.7% | 3.6% | +0.9 pp |
| Core PCE (end 2026) | 2.7% | 3.3% | +0.6 pp |
| Key rate (end 2026) | 3.4% | 3.8% | +0.4 pp |
| Real GDP (2026) | 2.4% | 2.2% | -0.2 pp |
| Unemployment rate (2026) | 4.4% | 4.3% | -0.1 pp |
Source: Fed Summary of Economic Projections, June 2026
Who Wins and Who Loses
In this new reality, three groups of beneficiaries and three groups of losers have clearly emerged. Among the winners, first and foremost is the US dollar. The DXY index has firmly settled above 100 points, reaching highs since March. This is logical: the expectation of rate hikes makes the dollar the most attractive asset for carry trade. Emerging market currencies, on the other hand, come under dual pressure: a stronger dollar and tighter global financial conditions.
The second beneficiary is the semiconductor and chip manufacturing sector. This may seem counterintuitive amid the overall market decline, but the data says otherwise. Micron rose 2.2%, Marvell gained 3.9%, Intel 3.5%. The reason is that falling oil prices reduce operating costs and margin pressure, while structural demand for AI infrastructure remains extremely high. This is a rare island of stability amid the general outflow from tech giants. The third group is airlines and cruise operators. American Airlines and Southwest Airlines surged 4% on lower fuel costs.
Among the losers is the "Magnificent Seven" in full force. Meta lost 4.2%, Microsoft 3.6%, Alphabet 2.4%, Amazon 3.1%. This is not a random correction: high rates hit companies with long-duration cash flows, and these giants require decades to recoup current AI investments. The second group of losers is the energy sector. The drop in oil following the US-Iran deal hit shares of APA Corp, Valero Energy, ConocoPhillips, which lost more than 1-2%. But the story is more complex here: low oil reduces inflation, which in the long term could save markets from more aggressive Fed actions. For now, energy companies are hostages of geopolitical détente.
The third group is software and cybersecurity. Atlassian, Palantir, ServiceNow lost more than 2-3%. These are companies most sensitive to the cost of capital, as their business models rely on long-term contracts with corporations that, under high rates, begin to review IT budgets.
What the Media Isn't Saying
The main omission in the public domain is the link between falling oil prices and the Fed's hawkish pivot. The media presents this as a contradiction: oil falls, but rates rise. In reality, Warsh and his team have already factored higher inflation into their forecasts regardless of oil. They are concerned about core PCE—core inflation excluding volatile energy and food prices. This indicator rose 0.37% in May versus 0.24% in April, and since the start of the year, the average monthly increase is about 0.36%. According to 22V Research calculations, to justify the Fed's new forecasts, core PCE would need to slow to 0.21% per month—which is highly unlikely. The US services sector is so overheated that even with zero oil prices, inflation in this part of the economy remains 70 basis points above the target level.
The second non-obvious insight relates to the bond market. 22V Research has a target for 2-year note yields at 5%. If this level is reached, it would trigger a deep correction in stock markets, comparable to the 2022 decline. But markets are not even seriously discussing this scenario now, because it would imply at least a 100 basis point rate hike from current levels. However, the dot plot has already priced in two 25-point hikes—that's 50 points, and if current inflation dynamics persist, markets may price in even more.
The third point is the complete absence of discussion about the impact on the IPO market. SpaceX conducted a record $75 billion offering that was oversubscribed 4 times. Anthropic and OpenAI are preparing giant IPOs. Typically, such events drain liquidity from the secondary market to the primary market, creating additional pressure on shares of "old" tech companies. The combination of this factor with monetary tightening could trigger a domino effect not factored into current valuation models.
Forecast: Next 30 Days and 90 Days
On a 30-day horizon, the key event will be the core PCE data release on June 25. If the figure comes in above 0.3% month-on-month, the risk of a rate hike in October becomes virtually inevitable. This would trigger a new wave of selling in the tech sector and push 10-year bond yields above 4.5%. In this scenario, the S&P 500 could correct 5-7% from current levels, especially considering that the seasonal factor (summer months are historically weak for the market) also works against buyers. Meanwhile, the dollar will continue to strengthen, and the EUR/USD pair could test the 1.05 level.
If core PCE shows a value around 0.2% or lower, markets will get a breather. But even in this optimistic scenario, the Fed's pivot has already happened—rates will not be cut, and the era of "low rates forever" is over. This means that tech company multiples must be revised downward. On a 30-day horizon, we will see a return to trading in a wide range with increased volatility but no clear trend.
On a 90-day horizon, the picture becomes clearer. By September-October, markets will have fully priced in at least one rate hike. The main question is no longer "will they or won't they," but "how aggressive will the tightening cycle be?" Fed forecasts imply a rate of 3.8% by year-end, but if inflation continues to accelerate, the actual rate could be higher. This would create conditions for a rotation from growth stocks to value stocks, as well as into defensive sectors—healthcare, utilities, consumer staples. In this scenario, the Dow Jones, which is less dependent on the tech sector, will outperform the S&P 500 and Nasdaq.
Editorial Forecast
Based on current data, we expect that over the next 24-72 hours, the S&P 500 will continue to show sideways movement with reduced volatility ahead of the core PCE data. The key support level is at 7,400 points, resistance at 7,550 points. Confidence in the forecast is moderate, as the market is entirely dependent on a single macroeconomic indicator. The main risk is an unexpectedly high core PCE reading, which could trigger a sharp 2-3% drop in a single session.
The US dollar, on the other hand, will maintain an upward trend with a target of testing the 101.5 level on the DXY index. Confidence in this forecast is high, as the rate differential between the Fed and other central banks continues to widen. The risk to this scenario is an unexpectedly "dovish" comment from Warsh, but his previous statements make such a turn unlikely. We recommend maintaining an elevated cash allocation in portfolios and avoiding long positions in the software and cybersecurity sectors until the inflation situation becomes clearer.
This material is analytical in nature and does not constitute individual investment advice. All decisions to buy or sell assets are made independently based on your own risk assessment.
— Editorial Team
