Get Ready for the Stock Market's Volatile Summer — Barrons.com

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By Martin BaccardaxThe fastest inflation reading in three years should hardly be a reason for relief. Yet investors are clinging to signs that price pressures may be stabilizing as markets navigate rising oil prices, Middle East tensions, and growing concerns about the Federal Reserve's next move.The S&P 500 is still in negative territory for the month, having slumped hard last week after a stronger than expected jobs report that stoked concerns about a Federal Reserve rate hike and tore nearly 200 points from the benchmark by the end of the trading session.But Wednesday's inflation report, which showed the fastest headline price gains since 2023 and a core reading closing in on 3%, is oddly providing some stability to markets amid escalating tensions in the Gulf and a crucial SpaceX listing later in the week."Since Friday's jobs report, there's been a palpable jitteriness among investors worried about the Fed's next move," said Bret Kenwell, U.S. investment analyst at eToro. "Investors had also been banking on a quick peace deal in the Middle East, but that outcome continues to elude world leaders as confidence in the ongoing truce ebbs and flows with each headline.""The trouble is, the longer it takes to find a resolution, the more likely oil prices remain elevated," he added. "And the longer energy prices stay elevated; the stickier inflation can get."Last week's hotter than expected jobs report, which included the strongest three-month hiring gains in more than a year, stoked bets on a Fed rate hike and pushed the whole of the Treasury bond curve higher into the final month of the quarter.The CME Group's FedWatch tool, meanwhile, brought forward its bets on a Fed hike to October, where the odds are trading at around 50/50, with the odds of a September increase rising to around 33%.The market's benchmark volatility gauge is starting to flash red, as well, following two months of dormant readings tied to the long surge in tech stocks.The VIX index now seems parked north of the 20-point mark, a key level of volatility for Wall Street that signals daily swings of around 97, or 1.3%, for the S&P 500 over the next month .That's a big change from late May, when tech stocks were leading a historic run of market gains, with both the S&P 500 and the Nasdaq printing daily all-time highs, thanks in part to artificial intelligence optimism and a storming first qua...

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