NEW YORK, March 7 (Reuters) - A critical inflation

report in the coming week could further rattle an increasingly

tumultuous U.S. stock market, with investors worried about an

economic growth slowdown and President Donald Trump's tariffs.

Despite a gain on Friday, the benchmark S&P 500

marked its worst week in six months. The tech-heavy Nasdaq

Composite on Thursday ended down more than 10% from its

December all-time closing high, confirming it has been in a

correction for several months.

Investors were grappling with dramatic policy change around the

world. Trump's back-and-forth implementation of fresh tariffs on

Mexico, Canada and China exacerbated broad concerns about the

economy. Markets were also shaken by Germany's surprise spending

plans, which drove a selloff in the benchmark German Bund.

As recent U.S. economic data has disappointed, one silver

lining for stocks has been markets factoring in more interest

rate cuts by the Federal Reserve this year to account for

potential growth weakening.

But Wednesday's U.S. consumer price index report could

scuttle those expectations if it confirms that inflation is

still simmering at levels that force the Fed to keep monetary

policy tighter.

"A hot CPI print will likely scare the market," said Bryant

VanCronkhite, senior portfolio manager at Allspring Global

Investments. "The market still wants the Fed to come to the

rescue... Until inflation and inflation expectations come down,

the Fed is handcuffed."

Investors are mindful of last month's hotter-than-expected

CPI data that saw inflation rise 0.5% in January, its biggest

monthly gain since August 2023.

CPI for February is expected to have climbed 0.3%, according

to a Reuters poll.

The inflation report will be among the last key pieces of data

before the Fed next meets on March 18-19. While the central bank

is expected to hold its benchmark rate steady at 4.25%-4.5% at

that meeting, Fed funds futures indicate about 70 more basis

points of easing are expected through December of this year,

according to LSEG data.

"Equities would not enjoy a hot CPI print because... it

softens that Fed easing view that has been starting to build in

the market," said John Velis, Americas macro strategist at BNY.

Investors are also increasingly concerned about "stagflation" -

slowing growth and rising inflation that is feared to be a toxic

combination for a broad range of assets.

An elevated CPI report could "bring the 'S-word' into play,"

Velis said.

Data on Friday

showed U.S. job growth picked up in February, but cracks

are emerging in the once-resilient labor market amid chaotic

trade policy and federal government spending cuts.

The market's focus will also be on Washington, as lawmakers

wrangle over a spending bill that would avert a partial shutdown

of agencies late next week.

Trade policy remains in the spotlight. Tariffs on foreign

imports are expected to hurt corporate profits and increase

consumer prices, but investors are weighing how lasting the

levies will be against their potential as negotiating tools.

Trump on Thursday said Mexico and Canada won't be required to

pay tariffs on goods that fall under a prior trade deal until

April 2.

Under the new Trump administration, the barrage of

initiatives on trade and other issues, such as federal workforce

cuts, has fed uncertainty for businesses and consumers.

Market unease is also rising. The Cboe Volatility index

jumped this week and was around its highest level since

late last year.

"Volatility is here to stay for a while because we do not

have economic and trade policy certainty," said Irene Tunkel,

chief U.S. equity strategist at BCA Research.

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