9:35pm: Eventful week for markets continues
Shortly after the opening bell, the Dow was up 275 points, 0.9% to 32,094, the Nasdaq Composite jumped 174 points, 1.6%, to 11,363 and the S&P 500 improved 52 points, 1.4%, to 3,908.
The markets responded swimmingly to fresh Consumer Price Index data. The CPI rose 0.4% in February after increasing 0.5% in January, in line with expectations.
“It’s been an eventful week for markets and today’s inflation print doesn’t change that,” said John Leiper, chief investment officer atTitan Asset Management. Headline inflation came in-line with expectations although core inflation picked-up slightly month-on-month. This keeps the Fed in a somewhat tricky position. The Fed cannot fall behind the inflation curve, its credibility is at risk if it does, but equally the lagged impact of prior tightening is now starting to show its face, as evidenced by the recent Silicon Valley Bank failure. This remains a delicate balancing act for Jerome Powell and markets won’t like the ongoing uncertainty.”
8:30am: CPI in line with expectations
US stock futures extended their gains after the Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose 0.4% in February after increasing 0.5% in January, in line with expectations.
With an hour to go before the market opens, futures for the Dow Jones Industrial Average (DJIA) are 0.6% higher, while those for the broader S&P 500 index have gained 0.7%, and contracts for the Nasdaq-100 have added 0.6%.
Over the last year, the all-items index increased by 6%, the smallest 12-month increase since the period ending September 2021, the Bureau said.
However, core inflation, which excludes volatile food and energy costs, rose 0.5% month-over-month (m/m) in February and 5.5% on an annual basis, coming in above the 0.4% and 5.5% expected by the market.
The index for shelter was the largest contributor to the monthly all-items increase, accounting for over 70% of the increase, with the indexes for food, recreation, and household furnishings and operations also contributing, the Bureau added.
“The US CPI data has printed a mixed number today, but traders are paying less attention to the core CPI number which surged. Most traders are satisfied with the headline month-on-month data which matches the expectations,” commented Naeem Aslam, chief investment officer at Zaye Capital Markets.
“But remember, CPI data isn’t the only factor that is going to move the markets and price of gold today. SVB’s fallout is more important here and the price action is likely to remain immensely choppy,” he added.
7:30am: CPI out at 8:30am ET
Wall Street is expected to open higher ahead of the release of February’s Consumer Price Index (CPI) which is now likely to carry less weight in the Federal Reserve’s next interest rate decision due to the fall-out from the collapse of Silicon Valley Bank (SVP) and Signature Bank.
Futures for the Dow Jones Industrial Average (DJIA) rose 0.5% in Tuesday pre-market trading, while those for the broader S&P 500 index gained 0.6%, and contracts for the Nasdaq-100 also added 0.6%.
US stocks ended mixed in volatile trading on Monday as SVB dominated investor sentiment. President Joe Biden assured depositors that their money would be protected, and some speculated the bank’s failure would mean an end to interest rate hikes when the Federal Open Market Committee (FOMC) meets next week.
The DJIA closed 0.3% lower at 31,819, while the Nasdaq Composite added 0.5% to 11,189 and the S&P 500 lost 0.2% to 3,856. The small-cap Russell 2000 index declined 1.4% to 1,749.
Ahead of the never FOMC meeting, the Bureau of Labor Statistics releases February’s Consumer Price Index (CPI) at 8:30am ET Tuesday.
The CPI is expected to show both headline and core inflation up 0.4% month-over-month, which would pull annualized headline inflation down to 6% from 6.4% previously and core inflation to 5.4% from January’s 5.6% gain.
“The US CPI data due today could reshuffle the Fed expectations regarding what will happen next week,” commented Swissquote Bank senior analyst Ipek Ozkardeskaya. “Both headline and core inflation are expected to have eased in February, but investors are cautious given that last month’s disappointment could be repeated this month, as the base effect – where we will finally start comparing the war months to the war months – won’t be in play until March as Russia invaded Ukraine by end of February last year.”
Ozkardeskaya noted that potentially faster rate hikes to contain inflation are no longer expected.
“On the contrary, there is now a massive lack of consensus in the market regarding what the Fed should do, and what the Fed will do,” she said. “Some think that if today’s inflation data is not sufficiently soft, the Fed should continue hiking by 50 basis points. Some others think that the Fed should simply hike by another 25 basis points this month and signal a pause starting from the next meeting – which would be the smoothest solution of all for the market. An increasing number of investors and bank analysts including Goldman Sachs believe that the Fed will skip the March rate hike.”