The CPI is expected to be released today even though the government is shutdown. A limited number of employees were recalled to compute the calculations as they are paramount for the calculations for next year’s social security’s COLA.
Inflation is expected to increase by 0.4% in September. The core rate is expected to rise by 0.3%. Year over year, inflation is anticipated to rise by 3.1%, a slight increase from August’s data.
It is believed that equities will likely shrug off any evidence of this stubborn inflation as the market narrative is dominated by optimism for an expected Federal reserve inters rate cut next week.
Today’s CPI might have outsized importance given it is the first piece of official data released since October 1, one of the few clear signals of the state of the economy ahead of next week’s Fed meeting.
Bloomberg calculates that if the data if inflation exceeds forecasted levels, a drop of 2.3% in the S & P 500 is possible.
As widely known, the S & P 500 has been on an absolute tear since April’s tariff induced lows, predicated upon a more accommodative Fed because of lower inflation, AI mania and the ensuing belief that tariffs are more bark than bite.
Commenting on yesterday’s market activity, oil surged on potential curbs on Russian energy sector. The 6% jump caused a selloff in longer dated Treasuries causing a moderate steepening in the yield curve. Equities were mixed with energy outperforming. The mega caps shrugged off TSLA’s disappointing report, the increase in yield and were moderate performers.
Gold also rose.
Lat night the foreign markets were mixed. London was down 0.04%, Paris down 0.59% and Frankfurt down 0.10%. China was up 0.71%, Japan up 1.35% and Hang Seng up 0.75%.
Futures are up about 0.25% before the CPI. The 10-year is off 3/32 to yield 4.01%.
