From Wednesday morning’s pre-market trading prior to the March CPI report, market came crashing down more than -500 points on the Dow before the opening bell, then lost -1.09% by the close. The S&P 500 dropped another -0.95%, and the Nasdaq fell -0.84%. The Russell 2000 really fell off a table today, -2.52%. From late March highs, the small-cap index has shed more than -5.3%, which is the worst of the four main indices.
US CPI INFLATION Y/Y OVER THE LAST 12 MONTHS:
*MARCH +5.0%
*APRIL +4.9%
*MAY +4.0%
*JUNE +3.0%
*JULY +3.2%
*AUG. +3.7%
*SEPT. +3.6%
*OCT. +3.2%
*NOV. +3.1%
*DEC. +3.4%
*JAN. +3.1%
*FEB. +3.2%
*MARCH 3.5%
⚠️ Trading tips: looking at QQQ calls above 439 and puts below 435 after PPI data releases at 8:30am on Thursday.
Thanks NVDA & META for holding the market
In the minutes of the latest FOMC meeting, out this afternoon by chance, members were expressing concern that inflation had not been moving lower faster. They also vowed to not cut rates until they had “gained greater confidence” that inflation was headed back toward 2%. Geopolitical strife had helped boost oil prices higher, and the price at the gas tank has indeed gone up for Americans. The Fed experienced “uncertainty at the persistence of high inflation.”
March FOMC Minutes: Key Highlights
* Participants generally expressed uncertainty regarding the persistence of high inflation and conveyed the view that recent data “had not increased their confidence” in the sustained movement of inflation towards the 2% target.
* Some participants pointed out that the recent increases in inflation had been relatively widespread, indicating that they should not be dismissed as “merely statistical aberrations.”
* Several participants highlighted the strong labor market, ongoing wage gains, and generally healthy household-sector balance sheet as factors expected to continue supporting consumption.
* Some participants highlighted geopolitical risks that could lead to more severe supply bottlenecks or increased shipping costs, potentially exerting upward pressure on prices. They also noted that such developments could negatively impact economic growth.
* Several participants remarked that increased efficiencies and technological innovations had the potential to boost productivity growth, potentially enabling the economy “to grow faster without raising inflation.”
* Participants noted that the disinflation process was continuing on a path generally expected to be “somewhat uneven.”
* Almost all participants concluded that it would be “appropriate” to move policy to a less restrictive stance at some point this year if the economy progressed generally as anticipated.
* They added that it would not be appropriate to reduce interest rates until they had acquired greater confidence that inflation was steadily moving towards 2%.
When to cut and pump the market?
Market reactions show that market were unchanged following the release of March FOMC minutes, with SPDR S&P 500 ETF (NYSE:SPY) down 1% for the day.
The market’s next key inflation tests come Thursday with March’s producer price index. Economists polled by Dow Jones expect wholesale prices to have grown by 0.3% in March, and 0.2% when excluding food and energy. Separately, weekly jobless claims are also due before the bell.
Here we’ve seen figures much closer to the 2% optimal interest rate, even below it: +1.6% year over year, as of February. Perhaps we’ll see a jolt here, as well, with energy prices doing their thing based on Mid-East turmoil. But perhaps we’ll also get a reminder that inflation has come down precipitously from the summer of a couple years ago without crashing into recession. And that may be worth holding onto.
Time for a dip buy?
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