S&P 500 & Nasdaq 100 Near Highs Ahead of Key Inflation Data

The S&P 500 and Nasdaq 100 have approached all-time highs, signaling a strong start to June for U.S. equity markets. This positive performance comes despite June historically being a weaker month. The markets have shrugged off mixed economic data, including the recent U.S. jobs report, which showed a strong labor market with firm wages and accelerating business activity. However, the Russell 2000 has not been shared in this rally, as it struggles with higher Treasury yields and weak technical footing.

The upcoming May U.S. inflation report and the Federal Reserve's interest rate decision on June 12 are major tests for the market. Traders are expected to remain cautious until these events, potentially leading to quiet trading days on Monday and Tuesday next week. The inflation data and the Fed's decision will be pivotal, possibly causing significant market movements depending on the outcomes. The market's response will be closely watched, as these reports could influence the future direction of monetary policy and overall economic health.

Despite the recent gains, market sentiment remains mixed. The S&P 500 and Nasdaq 100 have demonstrated strength, with both indices reaching new highs. However, the Russell 2000's year-to-date performance has dipped into negative territory, reflecting divergent views among equity indexes. Bulls are eyeing setups to capitalize on the recent rebound in the S&P 500, while bears could focus on the potential for short-term tops if key support levels are breached.

The Russell 2000's rangebound behavior over the past six months suggests a cautious approach is warranted. With higher volatility than the S&P 500 and Nasdaq 100, strategies like short strangles or iron condors might be more suitable for trading around its established range. As markets await the critical inflation data and Fed decision, traders must navigate the mixed signals and prepare for potential shifts in market dynamics.