The US market could break history and extend its record rally this week. Here is your checklist

Jessica Amir joined discussion · May 13 01:16

This week the US bull market could extend its record run with the S&P500 up 27% from its October and now just 0.5% away from striking its record all time high. If US CPI weakens as expected and US company earnings continue to beat expectations, then we will probably witness history, seeing the US market climb to new record highs.

What may support the US market higher is a bevy of factors including

- The VIX index closed at its lowest level since January 23 2024

- The breadth of the US market rally has extended; with 79% of the S&P500 companies trading above their 200-day moving averages which is a bullish sign.

- Plus the put/call open interest ratio is tilting bullish, and has fallen from its March high - suggesting there are more options for S&P500 companies stocks to rise than.

- Plus what's supporting stocks is the we haven't seen US companies earnings this strong in 10 years with many companies upgrading their outlooks (as we wrote in a note / spoke about on TV),

- What to watch in the US is CPI for April out in the US on their Wednesday. This is one of two prints the FOMC will have in hand at the June 11-12 meeting. But the Fed cares more about the core PCE deflator inflation read, next due May 31

o Core CPI is expected to have fallen to 3.6% (down from 3.8% according to Bloomberg). Headline is expected to have fallen to 3.4% YoY in April from 3.5%. Bloomberg estimates CPI drop is likely due to used-car prices falling 0.5%, and primary rents and owners-equivalent rent (OER) slowing in April (to grow 0.38% (vs. 0.41% prior)) while insurance and medical services kept pressure on prices.

o [CAUTION] But PCE deflator is expected to show headline prices rose due higher gasoline and food prices. Why? Well the PCE deflator counts food away from home as part of the core. And evidence suggests California restaurants are raising menu prices because of the state's 20% fast-food minimum-wage hike. And this component will keep upward pressure on core PCE.

o As we stand now though, the Fed Fund futures are suggesting traders are betting of a Fed cut in November and December.