US inflation rose in May at its fastest pace in almost 13 years and inflation worries could hit investor confidence in the upcoming days. US inflation hit 5% in May while ​some policymakers said that inflation would likely be transitory amid resurgent demand and supply chain lags.

The US Federal Reserve will have a monetary policy meeting next week and several FED members said that tapering should start “sooner rather than later.” The American central bank is widely anticipated to maintain its ultra-loose monetary policy unchanged; still, if FED decides to tighten its current policy, the U.S. stock indices will probably be at lower price levels.

“Inflation data has alarmed many investors, but for the moment the reaction is stocks are still preferable to bonds in an inflationary environment,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.

The latest Nonfarm Payrolls report missed economists’ estimate of 650K as the country added 559K jobs in May. This is certainly one of the reasons why the FED will not change its policy and continue with the focus on ensuring that the labor market makes a full recovery.

The positive news is that Initial Jobless Claims for the week ended June 4 came in at 376K signaling a steady economic comeback (the previous week was 428K). The June Michigan Consumer Sentiment Index improved by more than anticipated and reached 86.4 while the April Goods Trade Balance posted a deficit of $ 68.9 billion (better than anticipated).

S&P 500 up 0.41% on a weekly basis

For the week, S&P 500 (SPX) booked a 0.41% increase and closed at 4,247 points.

Data source: tradingview.com

S&P 500 advanced to its record highs on Friday and according to technical analysis, there is no risk of the positive trend reversal. If the price falls below 4,000 points, it would be a strong “sell” signal, and we have the open way to 3,900 or even 3,800 points.

DJIA down -0.80% on a weekly basis

The Dow Jones Industrial Average (DJIA) weakened -0.80% for the week and closed at 34,479 points.

Data source: tradingview.com

The Dow Jones Industrial Average continues to trade in a bull market; still, if the price falls below 34,000 points, it would be a strong “sell” signal, and the next target could be around 33,500 points.

Nasdaq Composite up 1.85% on a weekly basis

 The Nasdaq Composite (COMP) gained 1.85% on a weekly basis and closed at 14,069 points.

Data source: tradingview.com

The upside potential for the Nasdaq Composite remains limited for now, but if the price jumps above 14,100 points, the next target could be around 14,200 points. The strong support level stands around 13,500 points, and if the price falls below this level, it would be a strong “sell” signal, and we have the open way to 13,000 points.

Summary

Dow Jones, the S&P 500, and Nasdaq continue to trade in a bull market; still, if FED decides to tighten its current policy, the U.S. stock indices will probably be at lower price levels. US inflation rose in May at its fastest pace in almost 13 years and inflation worries could hit investor confidence in the upcoming days.

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