July’s Consumer Price Index (CPI) report is expected to trigger significant market movements on Wednesday, according to JPMorgan. The inflation data is crucial for the Federal Reserve’s upcoming interest rate decisions.
Analysts anticipate moderate increases in both headline and core CPI. JPMorgan’s analysis outlines potential S&P 500 performance ranging from declines of up to 2.5% to gains of up to 2%, depending on the core CPI’s month-over-month reading.
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Wall Street is bracing for potential market volatility on Wednesday as July's Consumer Price Index (CPI) report is set to be released. JPMorgan's analysis suggests that the market's reaction will be closely tied to the inflation figures, which could significantly influence the Federal Reserve's decision on interest rates.
Economists polled by Dow Jones anticipate that the headline CPI rose by 0.1% in July, leading to a 3.4% year-over-year increase. Core CPI, which excludes volatile food and energy prices, is expected to have increased by 0.2% monthly and 2.5% annually. JPMorgan's trading desk highlighted the elevated importance of these inflation readings, particularly for the Fed's September policy meeting.
Current Fed funds futures indicate a nearly 52% probability of a rate hike in September, according to CME's FedWatch tool. The U.S. has, for now, avoided an inflation spike related to the Middle East conflict. However, the market is keenly awaiting evidence of whether core inflation remains 'sticky' or if a period of disinflation is still possible.
JPMorgan provided a detailed outlook for the S&P 500 based on different month-over-month core CPI outcomes:
- Core month-over-month above 0.3% (5% probability): The S&P 500 could decline between 1.5% and 2.5%.
- Core month-over-month between 0.25% and 0.3% (25% probability): The S&P 500 may slide by 0.5% to 1.25%.
- Core month-over-month between 0.2% and 0.25% (40% probability): The S&P 500 might rise between 0.25% and 0.75%.
- Core month-over-month within 0.15% and 0.2% (25% probability): The S&P 500 could gain 0.5% to 1%.
- Core month-over-month below 0.15% (5% probability): The S&P 500 is expected to jump between 1% and 2%.
