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Small business sentiment and ‘Brexit’ uncertainty: Here’s what could drive the market Tuesday

All benchmark U.S. markets posted modest losses Monday amid a continued decline in technology stocks. With a Federal Reserve statement coming out on Tuesday, key economic data scheduled for release and "Brexit" negotiations set to begin in the coming days, Chantico Global CEO Gina Sanchez discussed three market themes she is watching for on Tuesday and the week ahead.

1. Small business optimism

The National Federation of Independent Business on Tuesday is set to publish its monthly small business optimism data before the opening bell. Sanchez is watching for the report's results, which will show the index's reading for the month of May.

While small-business optimism rose following Donald Trump's election, more recent reports show the level of uncertainty among small-business owners has risen in the face of uncertainty surrounding Trump's future policies.

"The future outlook for small businesses took a hit in April when Congress was unable to address the concerns of small businesses, particularly the high cost of health care to small companies. We might start to see a reversal of that optimism tomorrow," Sanchez said Monday on CNBC's "Trading Nation."

2. U.K. uncertainty

Negotiations surrounding the U.K.'s exit from the European Union are set to begin in the coming days following the surprising outcome of the U.K. snap election in which Prime Minister Theresa May's Conservative party lost its majority in parliament.

Sanchez will be watching developments in the "Brexit" talks closely, as they will likely have an impact on European stocks and the pound.

"The FTSE 100 has been trading sideways with all the political uncertainty. And continuing questions around the U.K. hung parliament, and the postelection turmoil, could send the stock index deeper into the red, along with the sterling," Sanchez said Monday.

3. Check on inflation

The Bureau of Labor Statistics is set to publish Producer Price Index data, a measure of inflation, Tuesday before the opening bell. Sanchez will be watching for this reading, as it coincides with the beginning of the Federal Reserve's two-day meeting this week.

"This matters to the markets in many ways, but the most direct is to banks, whose earnings are being hurt as the short end of the curve moves up," Sanchez said Monday, referring to the yield "curve" formed when tracking U.S. Treasury yields at different maturities.

The central bank is widely expected to raise its federal funds target rate on Wednesday.

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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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