last weekm Employment statisticsAs the Fed’s dovish turn appears to have been ruled out, speculators are becoming riskier ahead of the US Consumer Price Index (CPI) release on the 13th. If year-over-year growth exceeds last month’s 8.3% gain, it would be a big problem for the stock market, according to the trading desk of JPMorgan Chase & Co ..
“It feels like another day with a 5% drop,” the team, led by Andrew Tyler, said in a report Wednesday. He noted that the S&P 500 index fell 4.3% on September 13, when the better-than-expected August CPI was announced. This scenario is a worst case guideline for clients experiencing a period of high market volatility relative to economic data.
JPMorgan economists led by Michael Feroli expect CPI growth to slow to 8.1% in September from the previous year. The median of economists surveyed by Bloomberg also expects an 8.1% increase. If the CPI rises from 8.1% to 8.3%, the S&P 500 could drop from 1.5% to 2% in a “boycott,” according to the bank’s sales trading team.
Unsurprisingly, the inflation data has had a big impact on the stock market. Barclays strategists such as Stefano Pascal say that analyzing the performance of the S&P 500 against 10 key economic indicators, including monthly employment data and quarterly gross domestic product (GDP), suggests that the performance of the S&P 500 is similar to how reacts to CPI today Never in the last decade has the stock market reacted so negatively to an economic indicator.
Excluding the July CPI, the S&P 500 fell every time better-than-expected consumer price data is released.
“This week’s CPI will be the most important factor leading to the FOMC meeting November 1-2. There is no consensus on the two meetings,” said JPMorgan’s Tyler. He added that any indication of strong inflation would encourage bond market repricing and raise the chances of another big interest rate hike in December.
On the other hand, any softening in inflation could trigger a rally in stocks, Tyler’s team said. If CPI growth falls below 7.9%, the S&P 500 is “likely” to rise from 2% to 3%, he added.
| S&P 500 on the day of the CPI | |||
| Release date | Actual reading (%) | Median forecast (%) | Move of the S&P 500 (%) |
| 2022 10 13 | ? | 8.1 | ? |
| 2022 09 13 | 8.3 | 8.1 | -4.32 |
| 2022 08 10 | 8.5 | 8.7 | 2.13 |
| 2022 07 13 | 9.1 | 8.8 | -0.45 |
| 2022 06 10 | 8.6 | 8.3 | -2.91 |
| 2022 05 11 | 8.3 | 8.1 | -1.65 |
| 2022 04 12 | 8.5 | 8.4 | -0.34 |
| 2022 03 10 | 7.9 | 7.9 | -0.43 |
| 2022 02 10 | 7.5 | 7.3 | -1.81 |
| 2022 01 12 | 7 | 7 | 0.28 |
news-rsf-original-reference paywall">Original title:JPMorgan says a CPI that is too hot would put stocks at risk of falling by 5%.(extract)
