Wall Street is abuzz over a potential stock market crash following the release of the April Consumer Price Index (CPI) report due this Wednesday, May 15. Indeed, the crucial inflation report will offer important insight into whether to expect interest rate cuts this year.
So, what do you need to know about this major market mover?
Well, the April CPI is to show sticky inflation, with elevated gas and service-sector prices. Consumer prices are predicted to climb 0.4% in April, the same as in March, putting annual inflation at 3.4%. That would be a slight decrease from March’s 3.5% reading. It would also mark the 11th consecutive month of inflation at or over 3%.
The core CPI, which excludes the volatile food and energy categories, is expected to decelerate to 0.3%, down from 0.4% in March. That would bring annual inflation to 3.6%, from 3.8% in March.
Should the forecasts hold true, it would likely only further confirm that inflation isn’t coming down — and that likely neither will interest rates.
Stock Market Crash Fears Swirl Ahead of CPI
At this point, many traders have already given up hope for a summer rate cut, instead counting on the first cut to come at the September policy meeting. However, should prices continue to climb at their current pace, some believe that the Federal Reserve may opt to keep rates elevated — or even increase rates — as a means to push prices down.
“It’s certainly not wasted on us that if the second quarter’s inflation profile mirrors that seen during the first quarter, then the [Federal Open Market Committee] might not be able to cut until 2025,” said BMO Capital Market Strategists .
Unfortunately, with the Producer Price Index (PPI) coming in hotter than projected on Tuesday, hopes are being tempered for the Wednesday CPI. Wholesale prices jumped 0.5% in April, reflecting annual inflation of 2.2%. This came in above forecasts of a 0.3% increase and March’s 1.8% PPI reading.
Producer prices tend to drip over to consumer prices. As such, some economists believe the PPI has set the stage for a potentially nasty CPI miss. That doesn’t bode well for stocks.
“An upside surprise here will likely introduce some volatility. For the S&P 500 to sustain its recent gains and potentially break new records, it is crucial that markets receive reassurance about the ongoing decline in inflation. This hinges on witnessing a notable decrease in Core CPI,” noted Russell Shor, Senior Market Specialist at FXCM.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the 香港六合彩玄机.com Publishing Guidelines.
