S&P 500: With CPI in Focus, Volatility Crush Could Spark Post-Report Bounce
2025.01.15 02:46
It was a very rocky trading session, with markets fluctuating significantly. As we head into the report, one noticeable aspect was the 1-day, which rose substantially yesterday. It closed up roughly 5.6 points, ending at 22.50. This highlights the nervousness in the market ahead of today’s report.
The is projected to rise from 0.3% to 0.4% month-over-month, with expected to hold steady at 0.3%. The CPI is anticipated to increase to 2.9% year over year from 2.7%, while is projected to remain unchanged at 3.3% year over year.
Looking back, there have only been two instances in the past year when the report was released before the CPI report. Historically, the market has made minor adjustments based on this report. However, based on intraday swaps data, it doesn’t appear that the market has shifted its expectations for today’s CPI report. Swaps pricing remains around 2.9% year-on-year and suggests a month-over-month change of approximately 0.4%, which aligns with analyst expectations.
A 0.4% m/m number is unfavorable for the Fed and will probably cause the market to remove rate cuts for 2025 from its equation. Despite a cooler-than-expected report, rates were flat at 4.80%, while rates edged slightly higher to 4.98%. The weakened marginally. Obviously, a miss on the CPI would cause rates to drop sharply and the index to decline, which would be a positive for the stock market.
With the 1-day VIX high, there is an opportunity for a volatility crush following the data’s release, which means the initial market reaction might not reflect the eventual trend. So, a post-CPI rally, regardless of the data, is likely. Otherwise, support in the remains at 5,780, with resistance at 5,875.
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