US stocks, what to expect after the inflation data

15 November 2023 - 13:00

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After the better-than-expected Inflation Rate and the Core Inflation Rate in the United States, how could the US stock markets react?

US stocks, what to expect after the inflation data

What should we expect from US stocks after the release of inflation data? The YoY inflation rate, expected at 3.3%, was actually lower at 3.2%, hence closer to the 2% target rate. The Core Inflation Rate YoY, forecast at 4.1%, came in at 4%, also below estimates. This data offers a clue of particular relevance for the markets, as it provides clear signals for understanding the reduction in expectations linked to interest rates. The latter directly impacts the price of market assets, altering their performance.

CPI at 3.2%: what could this mean from an economic point of view?

A decline in the consumer price index in the United States naturally has a negative impact on expectations related to the future trend of interest rates. It is no coincidence that the CME’s FedWatchTool reported a week ago a level of 90.2% with a target price of 525-550, while before the publication of the CPI, it had reached around 85%.

It might therefore make sense to expect even higher levels. In essence, the economic prospects remain those of a reduction in the inflation rate, as confirmed by the survey conducted by the New York Fed, which indicates a prospect of reaching the level of 2.7% by 5 years. However, the Fed’s target remains 2%, so it is not a given that this level will be reached in the short term.

What to expect after these results

Last week was characterized by a strong appreciation of the US equity market and a reduction in US Treasury yields, configuring an overall positive scenario for investors in stocks and debt securities.

In the same period, the US dollar showed, before the data was shared, a slight depreciation against the basket of currencies identified in the DXY index, in line with the ongoing trend since the middle of last week.

The disclosure of the results linked to the US inflation rate, which took place at 2.30 pm, had a direct impact on the futures market, both equity and currency. The stock market recorded a significant appreciation, fueled by the euphoria linked to the data. The currency market, on the other hand, accentuated the movement underway before the release of the inflation data. These movements suggest the possibility of a further development in the trend of the last week, which could be confirmed in subsequent stock market sessions.

S&P500: a look at price targets

For the S&P 500 index, the highs of the year are placed on the threshold of 4,600 points, a value close to which the index has started a correction process. However, it seems that the trend of successive lower highs has been interrupted in recent days, with the break of the 4,400-point level.

S&P500, 1D

Original article published on Italy 2023-11-14 17:34:37. Original title: Azioni USA, cosa aspettarsi dopo il dato sull’inflazione

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