Two inflation numbers come out in the same report on June 10, and they're moving in different directions. Headline CPI is expected to push above 4% in May while core CPI is expected to ease to 0.3% month over month.
The gap between those two numbers matters more than either one alone, because it shows whether the recent jump in energy and input costs is starting to seep into the rest of the economy.
The Bureau of Labor Statistics releases its May CPI reading on June 10, and headline inflation - the all-in number that includes food and energy - is expected to top 4%.
Core inflation tells a different story, with the monthly increase expected at 0.3% after a 0.4% reading in April.
So the headline number is jumping while core is easing, and that gap is what investors are watching most closely heading into the print.
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Energy prices are doing most of the work on the headline side, with manufacturing input costs - the raw materials companies pay before they can make anything to sell - climbing right alongside them.
Those costs don't stay at the factory, and they flow into the price of goods on the shelf and services people pay for, usually with a delay of a few months.
The catch: a headline spike now can become a core spike a few months later. Core is holding for today, but if input costs keep climbing, the line between the two numbers gets thinner fast.
The S&P 500 is trading at valuations some analysts call bubble territory, which leaves the market exposed to an inflation shock paired with higher-for-longer rates.
Some analysts are already responding by moving cash into 1-to-3 month Treasury bills - short-term government debt that pays interest - as a place to wait it out. That corner of the market tends to benefit when rates stay high.
The full report drops June 10.
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