The Coming Week: An Eye on Prices

Investors will continue to sift through helpings of economic data in the coming week for signs that the Fed could be closer to increasing interest rates to stave off growing inflation. One of the most eagerly awaited numbers likely will be Friday's consumer price index.

"The market is very attuned to news on inflation and trying to put together any further early signs of acceleration. We're spooked about this now," said Jim Awad, president and market analyst at Awad Asset Management. Forecasts are calling for a 0.3% rise in April CPI on top of March's 0.5% increase. Excluding food and energy, core CPI is expected to rise 0.2%, down from the prior month's 0.4% increase.

"If [the CPI report] shows again that inflation is accelerating, then people will say [interest] rates will go higher," said Paul McManus, director of fundamental research at Independence Investments. In that case, stocks would react negatively, he said.

While McManus pointed out that the Fed has been clear that inflation is not yet a worry, he said, "What everyone is focusing on is when is the Fed going to raise rates and how much it is going to be. Every economic statistic is either going to lend evidence that the Fed is going to do something or it's not."

Sluggish Stocks

Particularly after Friday's blowout employment numbers, investors are very concerned that the improving economy means interest rates will be raised in June. That worry translated into lackluster stock movement, which could remain the case in the early half of next week because the big economic reports don't begin until Wednesday.

The Dow Jones Industrial Average closed down 1.2% on Friday, while the Nasdaq dropped 1% and the S&P 500 declined 1.4%. All three indices were down for the second week in a row. The Dow extended its losing-week streak to three in a row, down about 1% from the previous Friday's close. The S&P lost 0.8% in the week and the Nasdaq dropped 0.1%.