(Bloomberg) -- This week’s lull in the US stock market is likely to end with Wednesday’s consumer price index report, and Goldman Sachs Group Inc. partner John Flood has offered a set of guidelines for what investors may soon face.

Expect the S&P 500 to drop at least 2% should the year-over-year inflation rate come in above the previous reading of 6%, Flood wrote in a note Tuesday. But stocks are likely to go higher, he says, if CPI meets or trails 5.1%, which happens to be the consensus estimate from economists in a Bloomberg survey. 

“Stock market wants a softer print as a hot reading will add more confusion/uncertainty into the equation of what the Fed does from here,” the veteran trader wrote. “Another hike in May but then aggressive cuts in Q4? This is what Fed fund futures are pricing in ahead of tomorrow’s print.” 

Treasury yields climbed Tuesday while equities fluctuated in a tight range as traders awaited both the inflation data and bank earnings later this week. Stuck in a 0.5% band, the S&P 500 was headed for the calmest session since November amid anemic trading volume.

The Federal Reserve in 2021 and early 2022 misjudged inflation as transitory, then was forced to hasten rate hikes to slow the economy. The uncertainty over its policy path has made CPI data one source of heightened market volatility during the past year.

Over that time, the S&P 500 has moved, up or down, 1.9% on average on CPI day, more than twice as much as it did in the previous 12 months. 

The index has advanced 7% since January, partly on speculation the Fed will reverse course and ease monetary policy later this year as the probability of a recession has increased.

Flood’s scenario analysis provides a view into the risks facing investors Wednesday. One of their challenges is that inflation is measured in various ways.

Read more: US PREVIEW: Soft March CPI Print to Fuel Fed Rate-Cut Bets

While some economists and analysts are laser-focused on monthly changes, others are placing emphasis on data stripping out food and energy, something known as core inflation.  

Core inflation is what 22V Research asked its clients about this week in a survey. In that poll, about half of the respondents expected core CPI to be in line with the consensus of 5.6% or higher, and only a little over one quarter viewed the event as being risk-on. 

“Investors are waiting for a pullback and think macro data will provide it soon, a theme that has not played out YTD,”  Dennis DeBusschere, founder of 22V Research, wrote in a note. 

Inflation is expected to ease for the ninth straight month. While the decline is a sign that the Fed’s aggressive monetary tightening may have tamed price pressures somewhat, inflation is still far from the central bank’s 2% goal. 

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