The latest consumer price index reading is around the corner, and the outcome could sway the stock market, according to JPMorgan’s traders. The January consumer price index due Tuesday morning is expected to continue the recent trend of easing inflation. Economists polled by Dow Jones anticipate a rise of 0.2% last month, and a 2.9% increase from the year-ago period. That’s down from increases of 0.3% and 3.4% in December, respectively. Core CPI, which excludes volatile food and energy prices, is also expected to remain in line or trend slightly lower. Prices are forecast to have increased 0.3% on the month and 3.7% on the year, according to consensus estimates. That’s compared to December’s gains of 0.3% on a monthly basis and 3.9% from the 12 months prior. Investors are hoping a downward trend in inflation means the Federal Reserve can start to cut interest rates, so a stronger-than-expected reading has the potential to ding stocks. Meanwhile, a cooler reading could drive equities higher. Investors got a small window into how stocks could perform Friday, when a downward revision in December’s CPI reading sent equities higher. Broadly speaking, however, JPMorgan traders do not expect the reading will change the narrative around rate cut expectations, which have moved out to May or June. Markets are pricing in a 52% chance of a quarter-percentage-point cut in May, according to the CME FedWatch Tool. Given this, JPMorgan’s U.S. market intelligence group laid out five scenarios to how the S & P 500 may react to Tuesday’s month-over-month core CPI reading: 45% chance — A rise between 0.2% and 0.3% could suggest “disinflation firmly entrenched,” an outcome in line with Fed Chair Jerome Powell’s expressed desire to see more “good data” in inflation readings. JPMorgan traders expect the S & P 500 could rise 0.5% to 1%. 25% chance — Between 0.1% and 0.2%. This scenario could boost demand for longer duration bonds and bolster some of the sectors that have been…
2024-02-12 15:40:00
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