CPI Surprise?

Yields could Pop...

KR Opinion

On Monday's trading escapade, we saw the S&P 500  futures gallantly climb to the 5060 level, only to execute a swift about-turn as if spooked by its own shadow, thanks to a robust round of profit-taking among the tech giants. Microsoft and Amazon were at the forefront of this retreat, like reluctant leaders of a backward charge. In an intriguing subplot, the Russell 2000, not to be outdone, paraded a 1.8% gain, flexing its muscles in a display of underdog prowess.

The market's recent behavior has been akin to watching a suspenseful series where the plot barely advances—Monday's trading was a case in point, with a range as narrow as a tightrope at 35 points. Even with the S&P's brief dalliance with the 5060 threshold, it managed only a tentative step back, barely crossing below the S1 safety net, hinting at a market playing it safe.

As we peer into Tuesday, all eyes are on the CPI numbers, which are expected to reveal a modest 0.2% increase month-over-month. This might not cause a standing ovation, but it could certainly stir the pot a bit. I'll delve into the implications for the S&P in a bit, but let's say we're not expecting the market to break out of its low-volatility lull anytime soon.

However, should the CPI bring an unexpected twist, it could encourage the market to broaden its horizons, which would be a welcome change, even if it leads us down a bumpy road. A bit of movement might be the antidote to the market's current state of complacency.

Earnings season has once again proven to be a predictable affair, with the majority of companies outperforming expectations—over 70%, in fact. This recurring theme raises the question: Are analysts consistently underestimating, or is there a bit of stage management at play to maintain a positive market sentiment? I'm inclined to suspect a bit of behind-the-scenes orchestration.

Reflecting on my last report, I hinted at the S&P 500 potentially cresting above the 5100 level this week, though it might require some effort. A gentle retreat to the 4980 or 4960 region would not be unwelcome, setting the stage for what comes next. Focusing on the CPI data for Tuesday, although it's unlikely to dramatically shift the narrative, we'll remain vigilant for any surprises. The expectation is for more of the same, but in the world of trading, the only constant is change.