CPI Anticipation Fuels S&P 500 Rally Amid Inflation Speculation

📝 SUMMARY: On Wall Street, the S&P 500 ($.INX) staged a notable comeback in the closing moments of trading, ending the day up by 0.1% after initially dropping below the 5,200 level. This late-day rebound was fueled by investors adjusting their positions in anticipation of the upcoming Consumer Price Index (CPI) release, which is expected to significantly influence the Federal Reserve’s monetary strategy. Major tech stocks like Tesla soared, while Nvidia fell back, contrasting sharply with Intel's rise following its new AI chip announcement.

In the bond market, Treasuries rallied, pulling 10-year yields down six basis points to 4.36%, marking a retreat from their peak in 2024. This yield fluctuation reflects a broader hesitancy as traders await inflation data that could temper or intensify calls for Fed rate cuts. Currently, the swaps market is pricing in about 65 basis points of cuts by year-end, suggesting a cautious optimism about easing monetary policy.

The absence of major economic announcements left the market's focus squarely on the CPI data due Wednesday. Market sentiment has been mixed, with a recent survey indicating a shift among investors from a belief in a quick return to Fed-friendly inflation levels to concerns about longer-term inflationary pressures.

Experts like Mohamed El-Erian argue that the Fed’s inflation targets may be too rigid given the global economic transformations underway, suggesting a more nuanced approach might be necessary. Meanwhile, the Fed Bank of Atlanta's Raphael Bostic has voiced openness to modifying his rate cut forecasts based on upcoming economic indicators.

Looking ahead, investment strategies are tilting towards quality bonds, with preferences for those maturing within ten years. As the market navigates through these uncertain times, the upcoming CPI data will be pivotal in shaping economic expectations and Fed policy decisions, making it a critical watch point for investors worldwide.

🔍 SOURCE: https://www.bloomberg.com/news/articles/2024-04-08/stock-market-today-dow-s-p-live-updates