Source: Wall Street News
Over the past few weeks, US stocks have been making great strides.$S&P 500 Index (.SPX.US)$It was the longest upward cycle since 1964, yet just as investors regained optimism about the economic outlook, a key data could cast a shadow over this bull market.
The US CPI inflation data for February will be released this Tuesday (March 14). The market generally expects that the core CPI will continue to cool down in February, rising 0.3% month-on-month and 3.7% year-on-year. The overall CPI has accelerated. The overall CPI may rebound 0.4% from the previous month's 0.2% and remain the same as the previous month's 3.1%.
The analysis indicates that although inflation continues to slow, it is expected that it will take some time to fall back to the 2% target. If inflation is higher than expected, US stocks may once again fall into a vortex of turmoil, and investors will further question the sustainability of this bull market; the inflation data for February last year triggered a wave of sell-offs in the bond market, driving yields to a high point throughout the year.
On the other hand, favorable data will rekindle the market's confidence in the economic outlook and allow US stocks to continue to rise. The inflation data released on March 14 will become an important point in time.
Last month's CPI exceeded expectations across the board. In particular, data on the core services sector was unexpectedly strong, raising concerns that the Federal Reserve needs to continue to raise interest rates. The market reacted violently to the hot inflation data, and the S&P 500 index fell 1.4%, the biggest one-day decline in nearly half a year.
In fact, inflation data has become an important weather vane for the recent operation of US stocks. Over the past six months, the average volatility of the S&P 500 reached 0.8% on the day the core CPI was announced, which is significantly higher than the same period last year.
Recent inflation data is confusing, causing the market to worry about the pace of interest rate hikes. Federal Reserve Chairman Powell also recently sent a signal of caution. While testifying in Congress, he reiterated that definitive evidence is needed to prove that inflation is slowing before interest rate cuts can be taken.
Traders generally expect the Federal Reserve to cut interest rates for the first time in June and cut interest rates by about 100 basis points within the next year. In addition to the CPI data, investors are still waiting for a new round of interest rate bitmap to be announced by the Federal Reserve later this month.
In December of last year, officials expected to cut interest rates three times this year, and the Federal Reserve has maintained the target interest rate range of 5.25-5.5% at the highest level in 20 years since July last year.
Editor/jayden