Week Ahead: Tech Sell-off Into US CPI

The reversal of the recent parabolic move in certain tech sectors and the broader index rally will be under the spotlight at the start of the week. As we wrote in one of our dailies last week, the S&P 500 had risen over 20% since its March lows and enjoyed nine straight weekly gains, while also climbing for nine straight days. The former had occurred just 14 times since 1930, making the current streak one of the strongest momentum signals seen in modern market history. But history suggests markets take a breather straight after such powerful bull runs with mild pullbacks and short-term consolidation. 

One current issue is stock leadership, which has been looking ever narrower. Since late March, global equities have gained roughly 17%, but the move has been overwhelmingly powered by technology, which had rallied nearly 45% from the lows. Semiconductors led this charge, with their market cap at one point last week hitting roughly 18% of the market, compared to around 4% a couple of years ago. That all pointed to an overdue pullback; do we now get more focus on the US economy being overly concentrated on AI capex and circular financing, (amid the jumbo, historic SpaceX IPO), or is this a healthy correction and buying opportunity? 

Hot US inflation data could fuel more selling as potentially more than one Fed rate hike gets priced in by money markets by the end of the year. Last week’s upside breakout in the dollar sees bulls looking at the late March year-to-date top. The latest jobs data is looking brighter as the six-month average of private payrolls has picked up. That has been leading some Fed officials to question whether interest rates are currently less restrictive than previously thought. The new supposedly dovish new Fed chair will have to deal with that conundrum next week at his first FOMC meeting. Certainly, a stock market correction and more would undoubtedly threaten all that, though what usually turns a slowdown into something nastier is widespread job loss. Any Middle East solution would likely support markets in counteract more muted sentiment.

The ECB is very likely to go through with an ‘insurance’ quarter point rate hike on Thursday, even as it battles stagflation and then the rising risk of a policy mistake. What happens next is crucial with any guidance likely to be seized upon by markets. Fresh staff economic projections will offer some idea on the outlook but Lagarde and co will probably want to keep their options open with the Middle East situation still uncertain and fragile. There’s a little more than a cumulative 50bps of tightening priced in by September. The recent EUR/USD breakdown below 1.16 means bears are hunting for the mid-March low just above 1.14.

In Brief: Major Data Releases of The Week 

Wednesday, 10 June 2026

US CPI: May headline inflation is forecast to rise 0.3% m/m and 4.2% y/y from 0.6% and 3.8% respectively. Core, which strips out volatile food and energy prices, will print one-tenth higher than prior at 0.5% and 2.9%. Higher gasoline prices will drive the headline metrics, but shelter inflation and core goods may drag.

Bank of Canada Meeting: The BoC is expected to keep rates steady at 2.25%. The bank is firmly on hold, leaning neutral to hawkish due to energy-driven and potentially persistent inflation risks. But patience from policymakers is likely amid recent soft data, ongoing trade and Middle East uncertainties. 

Thursday, 11 June 2026

ECB Meeting: The ECB is predicted to hike the deposit rate by 25bps to 2.25%. Core inflation has moved above the bank’s baseline projections and recent comments from Governing Council officials have been relatively hawkish. Focus will be on the quarterly updated forecasts and energy price shock scenarios, along with President Lagarde’s press conference.

Friday, 12 June 2026

UK GDP: Consensus sees a contraction of 0.1% from the prior +0.3%. The Middle East conflict as well as the uncertainty around PM Starmer’s position likely weighed on activity. Front loading due to supply disruptions and price increases may also impact.

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