Market Analytics and Considerations
Key Points
CPI headlines
- MoM: 0.1 percent (predicted 0.3%; prior 0.4%).
- YoY: 7.1% (predicted 7.3%, actual 7.7%)
Basic CPI:
- (Predicted 0.3%, Previous 0.3%) MoM: 0.2%
- Year-over-year: 6.0% (predicted 6.1%, prior 6.3%)
US Dollar Index: Instant Response Noted IN Related Market segments (DXY)
Following the positive CPI statistics, the dollar index fell more than 1%. As a result, the dollar’s decline has picked up speed since the earlier October CPI reading.
US 2 Year Treasury Yield
The yield on the 2-year US Treasury fell as speculators changed their minds about the direction of upcoming rate hikes. The likelihood of a 25 basis point increase following tomorrow’s predicted 50 bps increase is already increasing, and indicated probabilities on Fed funds futures show that markets have revised their estimate of the endpoint rate to be closer to 4.8%.
E-Mini Futures-S&P500
US stock (S&P 500) futures surpassed the long-term trendline barrier that had held for the majority of this year without being breached. Equity market players interpret the slower rate of inflation growth as evidence that the Fed’s impending stop and shift may occur sooner than anticipated. Risky assets like the S&P 500 have generated protracted anti-trend swings at various points this year, but price action hasn’t broken through the long-term trendline serving as resistance until recently. The most recent action raises the question of whether the “bear market resurgence” has a foothold for a potential bullish divergence.
The S&P 500 E-Mini Futures graph displays how inflation readings have affected market direction as well as following momentum. When the 0.2% positive surprise materialized on September 13—the day the markets had been expecting a weaker CPI print for August—we saw an instant plunge (a total of -16%). Then, on November 10th, the October CPI data revealed the lower inflation print, which supported risky markets in the hope that the Fed could be compelled to ease off on its tightening as the inflation shows signs of slowing down. The lower CPI print helped the index increase by about 10%.
The dollar experienced considerable changes in response to recent inflation readings (CPI and the Fed’s favored inflation gauge, “PCE”), as would be expected. As anticipated, the September reading was hotter than anticipated, which gave the dollar new life as markets factored in more severe raising rates. The current dollar fall in prices before the CPI data has been put in motion by the most recent October CPI reading of 7.7%.
