UPDATED: CPI COMES IN LOW: Market Rundown | CPI Prep
WHAT THE PROS ARE LOOKING FOR
What we are living through now is structural, and so we are not dealing with a business cycle, but rather with something straight from the Book of Genesis … … a “seven fat years, followed by seven lean years ” -type of thing- Zoltan Pozsar August 1
***UPDATE: 8:35 CPI came in lower than expected. Both core and Headline were below expectations kicking buyers of bonds and stocks into overdrive. The market thinks the worst is almost over. Now we look for Fed speakers to dampen the upside the rest of the week***CPI 8.5% Y/Y, Exp. 8.7%CPI Core 5.9% Y/Y, Exp. 6.1%
Gold is over 1820, Silver is over $2070 and stocks are rippingMarket Rundown:
Good Morning. The dollar is down 28 bps. Bonds are slightly offered. Stocks are bid up about 25bps. Gold is down $5 and Silver is down 7 cents. Oil is down $1.80. Grains are mixed and Nat gas is also down 1%.
CPI Prep. This is What Pros are looking at:
Expectations
Headline CPI is expected to slow from 9.1% last month to 8.7% this month.
Core CPI is expected to go up however from 5.9 to 6.1% give or take
Reasons
Headline CPI is expected to slow from 9.1% last month to 8.7% this month. Why a drop to 8.7%? That is because of the big drop in the gasoline component. Gas is down about 7.6% for the month.
Core CPI is expected to go up however from 5.9 to 6.1% give or take. Why? Because Core has greater weight in services and rents. Rents are on a big upswing this month.
Those are the expectations and the known reasons for those expectations. To the extent things come in differently than the above expectations, the market will react.
The Possible Surprises
If the gasoline and rent components come in as expected but some other service component does not, that will also suprise markets. The fear for stocks is that the Fed will have to then get even more aggresive in tightening with a suprise to the upside. And that messes things up alot…..
Much More at bottom 