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The Fed’s decision and jobs data: Here’s what could drive the market next week

U.S. markets closed mixed Friday, as the Dow Jones industrial average notched a record close, the S&P 500 finish slightly lower and the Nasdaq Composite fell by nearly 2 percent. Technology stocks sold off in Friday trading amid growing concerns that the group is overvalued.

As the market gears up for a week in which the Federal Reserve is widely expected to raise its federal funds target rate, S&P Global portfolio manager Erin Gibbs breaks down three key market themes she is watching.

1. The Fed decision

The Federal Reserve policy committee releases its next decision on Wednesday. While market participants see the announcement of a rate hike as a near lock, Gibbs will be closely watching the decision and its market impact.

"I'll be looking to see if markets largely ignore any action or inaction by the Fed. Recently, markets have barely even fluttered after meetings. So we'll be on the lookout just in case something happens," she said Friday on CNBC's "Trading Nation."

An increase in the short-term rate target would mark the Federal Reserve's second hike this year, and its fourth since the financial crisis.

2. A check on inflation

Monthly Producer Price Index data and Consumer Price Index data, two measures of economic health and inflation, are due out before the opening bell next Tuesday and Wednesday, respectively. Gibbs is watching for the results of both key reports.

"I'll be looking for healthy inflation in both the consumer and commercial arenas," Gibbs said, adding that while there were "healthy" increases seen in April data, she will be watching for continued "stable inflation."

Economists are forecasting no change in either report on a month-over-month basis, according to FactSet estimates. Such forecasts reflect an expected slowdown in inflation on a year-over-year basis.

3. Jobless claims data

Initial jobless claims data is due out before the bell next Thursday, and Gibbs is looking to the data as an indicator of the next jobs report's strength.

"After the disappointing new jobs created for May, we'll be looking to see if there's any hope for a better number in June by looking at the jobless claims," she said Thursday.

Economists are forecasting 242,000 new jobless claims, down from 245,000 claims last month.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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