Rate-cut expectations have surged (dovishly) higher this week (along with tumbling Treasury yields) amid a mixed macro picture (Labor market 'good', Retail sales bad, Housing ugly).
Today could change all that as CPI for January prints withrisk skewed to the upside. January brings annual resets and they tend to surprise on the high side.
Despite the 'hot' whisper numbers (and 4 previous Januarys in a row of upside surprises), headline consumer price inflation came in cooler than expected in January (+0.2% MoM vs +0.3% expected). That pulled theheadline CPI down dramatically from +2.7% to +2.4% - near the lowest in 4 years...
Core CPI printed +0.3% MoM (in line with expectations), lowering theYoY change in core prices to +2.5% - the lowest since March 2021...
Finally, according to JPM's CPI market reaction matrix (based on what the core CPI MoM prints), we should expect a solid up day for stocks:
Core MoM prints above 0.45%. SPX loses 1.25% - 2.5%: odds 5.0%
Core MoM prints between 0.40% - 0.45%. SPX gains 0.25% to loses 75bps; odds 25.0%
Core MoM prints between 0.35% - 0.40%. SPX gains 0.25% to 0.75%; odds 42.5%
Core MoM prints between 0.30% - 0.35%. SPX gains 1% - 1.5%; odds 22.5%
Core MoM prints below 0.30%. SPX gains 1.25% - 1.75%; odds 5.0%
Source: ZeroHedge News
