Tom Lee told CNBC on Monday that the S & P 500 may jump 100 points following a lighter-than-expected inflation reading this week. "We thought a tactical sort of opportunity was emerging because last week the market sold off because the jobs report was too strong, yields really popped so investors are kind of [fearing] Fed higher for longer [and are a] little bearish into this week and I think core CPI could come in at 0.2 or better," said Lee, founder and head of research at Fundstrat Global Advisors, on CNBC's "Squawk Box." "It could be a huge downside surprise," Lee added. June's consumer price index is due Wednesday and economists polled by Dow Jones expect the core reading, which excludes volatile food and energy costs, to increase 0.3% from the prior month. On an annual basis, core inflation is expected to be 5%. After a roaring first half, the S & P 500 has cooled in July as investors interpreted some strong jobs data to mean the Federal Reserve would resume its hiking campaign after pausing in June. The S & P 500 shed 1.2% last week to close at 4,398.95. Lee's call would put it at a new high for the year near 4,500. .SPX YTD mountain S & P 500 YTD Lee said the 0.2% readings could be repeatable in the next few months, which would show the Fed is getting inflation back down near its annual inflation target of 2%. Lee expects short-term yields to decline, helping to trigger the rally. The 2-year Treasury yield hit a 16-year high last week. The widely followed Wall Street strategist, who was correctly bullish heading into this year, recently raised his year-end S & P 500 target to 4,825, which would put the benchmark at a record. That also makes him more bullish than all the strategists at major investment banks, according to CNBC Pro's survey . The average target there is 4,227. "I think there's a lot of entrenched skepticism," Lee told CNBC. "I think some of that will get shattered on Wednesday with CPI." Lee pointed out that earnings for S & P 500 companies excluding the energy sector are holding up. He defended the short-term nature of this particular CPI call. "I felt some urgency for our clients" following last week's pullback, said Lee. "This could be the first piece of really good news that the Fed can point to and say, 'That's why we are slowing the pace.'" "That gets priced out of the markets and equities can rally," he said.
