Stocks waver before inflation makes or breaks: markets wrap

(Bloomberg) — Stocks rallied at the start of a week with inflation data seen as key in shaping the outlook for Federal Reserve policy and the direction of markets.

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This month’s advance in the S&P 500 came close to erasing its April slide as speculation grew that inflationary pressures had eased. Although the annual increase in the core consumer price index due Wednesday will be the smallest in three years, the move will run faster to convince policymakers, who rely on persistently low inflation, to allow rate cuts.

JPMorgan Chase & Co. said investors are bracing for big swings in the S&P 500 following the CBI report, according to a note by Andrew Tyler. says its trading desk. Daily breakevens in the options market show traders betting that the stock market benchmark will move 1% in either direction after the data.

“The main risk is a warm CPI axis, but upcoming macro data creates a two-tail risk – one tied to stronger-than-expected growth fueling inflation concerns and the other weaker growth fueling slowdown or ‘stagnation’ concerns.” Tyler said.

The S&P 500 was near 5,230. The 10-year Treasury yield fell three basis points to 4.46%. The dollar fell.

Before that, economists will analyze the government’s report on producer prices on Tuesday to assess the impact of categories such as health care and portfolio management, which feed into the personal consumption expenditures price index – the central bank’s preferred inflation gauge. Federal Reserve Chairman Jerome Powell is scheduled to speak at a foreign bankers’ event in Amsterdam the same day.

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According to Stifel Nicolaus & Co.’s Barry Bannister, U.S. stocks are poised for an early correction this quarter as inflation sticks around and expectations the Fed will cut interest rates. He predicted the S&P 500 would fall 10% to 4,750 in the second or third quarter.

Investors are willing to reduce or reduce their equity exposure as they look to history for reasons to remain firm in their U.S. stock allocations after the S&P 500’s double-digit run.

Since the 1930s, missing 10 of the best days per decade would have yielded a 66% return — a fraction of the roughly 23,000% of returns invested on those days, according to Bank of America Corp. data. More importantly, those best days have come after the stock’s worst days, when sales were most attractive, the bank’s analysis shows.

“Market timing is fraught with risk, and panic selling results in high opportunity costs,” Savita Subramanian, head of U.S. equity and quantitative strategy at BofA, said in a note to clients on Friday. “‘Timing the market beats timing the market’ is an old but wise adage.”

Company Highlights:

  • GameStop Corporation became most famously known through Keith Gill’s social media “Roaring Kitty” after a cryptic post on X. He rose to fame in 2021 after posting a series of videos online urging investors to jump on the GameStop bandwagon during the meme-stock frenzy.

  • Apple Inc has struck a deal with OpenAI to use the startup’s technology on the iPhone as part of a broader push to bring artificial intelligence features to its devices, according to people familiar with the matter. has finished

  • Intel Corp. Apollo Global Management is in advanced talks with the investment firm to provide more than $11 billion in financing for a chip manufacturing plant in Ireland, the Wall Street Journal reported.

  • After raising its 12-month target to $1,200 from $780, Nvidia Corp said it sees the chipmaker “taking more of the pie” by “reloading on AI.”

  • Takeda Pharmaceutical Co. to develop AC Immune SA’s immunotherapies targeting toxic, abnormal proteins in the brains of Alzheimer’s patients in a $2.2 billion licensing deal.

  • BHP Group Ltd rejected an enhanced takeover offer from Anglo American Plc, which would have valued the mining company at around £34 billion ($43 billion).

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Highlights of this week:

  • Germany CPI, ZEW survey expectations, Tuesday

  • Bank of England economist Huw Bill speaks on Tuesday

  • US PPI, Tuesday

  • Federal Reserve President Jerome Powell and ECB Governing Council member Klaus Knott speak on Tuesday

  • China rate decision, Wednesday

  • Eurozone industrial production, GDP, Wednesday

  • US CPI, Retail Sales, Business Inventories, Empire Manufacturing, Wednesday

  • Minneapolis Fed President Neel Kashkari speaks Wednesday

  • Japan GDP, industrial production, Thursday

  • US housing starts, initial jobless claims, industrial production, Thursday

  • Philadelphia Fed President Patrick Harger speaks on Thursday

  • Cleveland Fed President Loretta Mester speaks Thursday

  • Atlanta Fed President Raphael Bostick speaks Thursday

  • China Property Prices, Retail Sales, Industrial Production, Friday

  • Eurozone CBI, Friday

  • US conf. Board leading index, Friday

Some key movements in the markets:

Shares

  • The S&P 500 was little changed at 9:40 a.m. New York time

  • The Nasdaq 100 was little changed

  • The Dow Jones industrial average rose 0.2%

  • The Stoxx Europe 600 fell 0.2%

  • The MSCI world index rose 0.2%

Coins

  • The Bloomberg Dollar Spot Index fell 0.1%

  • The euro rose 0.3% to $1.0802

  • The British pound was up 0.3% at $1.2559

  • The Japanese yen was little changed at 155.74 per dollar

Cryptocurrencies

  • Bitcoin rose 2.2% to $62,612.19

  • Ether rose 1.4% to $2,963.23

Bonds

  • The yield on 10-year Treasuries fell three basis points to 4.46%.

  • Germany’s 10-year yield fell two basis points to 2.49%.

  • Britain’s 10-year yield fell two basis points to 4.15%.

materials

  • West Texas Intermediate crude was up 1% at $79.05 a barrel.

  • Spot gold was down 0.7% at $2,343.97 an ounce

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This story was produced with the help of Bloomberg Automation.

–With assistance from Jessica Menton, Alexandra Semenova, Natalia Kiniasevich, Vince Cole and Craig Stirling.

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