Stocks Rally as Market Awaits CPI and Fed Chair Handover

US equity indexes rallied to new highs as oil prices remained elevated and investors priced in higher interest rates. Attention is focused on Tuesday's US Consumer Price Index release and the Federal Reserve leadership change from Jerome Powell to Kevin Warsh, effective May 15.

Equities advanced at the start of May even as energy costs and rate expectations moved higher. Oil is trading above pre-conflict levels, keeping input-cost pressures on the agenda for companies and for monetary policy discussions.

Markets experienced increased volatility after tit-for-tat strikes between the United States and Iran on May 7 and 8. Separately, a three-day Russia-Ukraine ceasefire was announced for May 9–11. Trading volumes and price swings reflected those events in equity, oil and safe-haven markets.

Forecasters expect Tuesday's headline CPI to rise 0.9% month on month, driven largely by higher gasoline and diesel prices. Core CPI is projected to increase about 0.3% for the month, with the annual core rate near 2.7%. The Fed transition is scheduled for May 15, when Kevin Warsh will assume the chair following Jerome Powell's tenure. Federal Reserve officials have indicated a reduced appetite for policy easing in recent communications.

Technical indicators on the US Dollar Index show the index below an ascending channel and trading under its 50-day and 200-day moving averages, near 98.46 and 98.54. Immediate support is at 97.702; a daily close below that level would open the path toward 96.901. A daily close above 98.729 would be needed to reverse the current bearish technical setup.

In Europe, market pricing shows a more hawkish path for the Bank of England than for the European Central Bank. Natural gas prices are calmer than during the 2022 crisis. Some market participants expect the ECB to shift rhetoric or policy in June while the BoE may maintain a steadier stance.

In Asia, China's trade data and a rising producer price index are scheduled this week, with exports forecast to grow roughly 6.5% year on year. India is expected to report a modest rise in inflation; gasoline prices there remain capped by the government while pass-through from oil to food prices is being monitored.

Market activity reflects continued investor interest in risk assets amid the data calendar and the Fed leadership change. Traders and investors are set to recalibrate positions after the CPI print and ahead of the May 15 chair transition.