The second week of June left behind a mixed feeling in the markets. On one hand, inflation continues to decline, and investors remain optimistic—especially around big tech. On the other hand, consumer spending is slowing down, manufacturing remains in negative territory, and the Federal Reserve seems to be on pause.

Is the market anticipating a recovery that hasn't arrived yet? Let’s take a look at what’s moving the wires on Wall Street.

Inflation is easing, but so is spending

The most anticipated figure of the week was the May Consumer Price Index (CPI), which showed a monthly increase of just 0.1%, and an annual rate of 3.3%. While still above the Fed’s 2% target, the number was well received, as it marked a clear improvement compared to previous months.

However, other indicators add complexity to the picture:

• Retail sales rose only 0.1% in May, well below the expected 0.2%.

• Consumer spending, a key driver of the U.S. economy, is softening.

• The savings rate increased to 4.9%, suggesting households are being more cautious.

In short: inflation is cooling, but partly because people are spending less.

Manufacturing still in contraction

The manufacturing sector also flashed warning signs. The ISM Manufacturing Index came in at 48.5, marking its third straight month in contraction (any number below 50 signals a slowdown). Firms in the sector reported fewer new orders and more cautious production plans.

This cooling could be tied to softer demand, higher borrowing costs, and trade-related tensions.

The Fed watches and waits

At its June 12 meeting, the Federal Reserve decided to keep interest rates unchanged in the 5.25%-5.50% range, as expected. The tone of the statement was key: the Fed acknowledged progress on inflation but made clear that it needs more data before deciding on any rate cuts.

Some Fed officials have even said that even if inflation slows down gradually, they might still lower rates if the broader economy weakens. For now, the approach is to wait and see.

Oil makes a comeback

Crude prices climbed during the week, driven by seasonal demand and geopolitical tensions:

• Brent rose 3.1%, closing near $82

• WTI gained 3.3%, reaching $78

Although prices fell slightly on Friday as tensions eased, volatility in energy markets could still affect inflation expectations if it remains elevated.

Wall Street: a volatile week with no clear direction

Markets started the week with enthusiasm after the CPI report, but ended slightly down due to the Fed’s cautious tone and concerns over weak consumer data:

• S&P 500: −0.4%

• Nasdaq: −0.6%

• Dow Jones: −1.3%

Big tech names like Apple and Nvidia led the early rally, but other sectors such as consumer discretionary and industrials ended the week weaker.

What to watch in the coming days

This week brings new data on the labor market and the Producer Price Index (PPI), which could give more clues about inflation trends. Remarks from Fed members may also shift expectations for possible rate cuts later this year.

In summary

Markets continue to look ahead with optimism, while the real economy moves at a slower pace. Cooling inflation is helpful, but weaker consumption and industrial activity raise doubts. For now, the Fed remains patient—and investors are navigating between hope and caution.

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Sources: Bloomberg, Reuters Energy, CNBC Markets, ISM Manufacturing Report