August 10, 2022
Good morning,
It’s one of those myopic days today for investors, a morning lacking market imagination or insight. The big inflation number was released this morning. July CPI data came in surprisingly good vs expectation – market moves are almost always driven by the printed data vs expectations. The absolute value of numbers rarely matter. In any event, the core CPI (no energy in core), the more important data point this month vs the headline number, came in below expectations.
In this modern market trading world that we live in today, remember that the initial market move following an important economic data release is largely machine driven by all the algorithmic programmed trading that dominates volume each day. The initial move on today’s CPI print was a jump in Futures by 60pts (+1.5%) for equities, and a drop of 15bps in yield on the 2yr treasury – both bullish. We’ll have to let the cash markets open to see if investors will allow the initial jump in price for stocks and bonds to stick.
One number, or better yet, one CPI print does not a trend make but today’s figures were unabashedly good for the bulls. This morning’s move in Futures will put the S&P 500 Index squarely into the resistance zone near 4200 that I have been harping about lately. Let’s see if our rally is up to the test. Certainly, the CPI data has helped.
Be well,
Mike