Dip bought $UBS as stocks reeled from CPI shock.
Market “crashed” - it happened!
I am certain that you would’ve already heard about US market on Tue, 13 Feb 2024 on the run up to Valentine’s Day.
It tanked on the back of US’s consumer price index (CPI) data for January 2024.
Being 2024’s first inflation report, there is a lot riding on it (as highlighted in my other post).
Exert it did.
By the time market closed on Tue, 13 Feb 2024: (see below)
DJIA: -1.35% (-524.63 to 38,272.75). Dow’s biggest 1-day percentage loss since 22 Mar 2023.
S&P 500: -1.37% (-68.67 to 4,953.16).
Nasdaq: -1.80% (-286.95 to 15,655.60). Worst of 3 casualties. Luckily it is still above the 15,000 support.
What happened?
To me, the higher than “expected” inflation data, was not really that “big a deal”.
Will elaborate later in my viewpoints: (mine & mine only).
As for Wall Street, when its expectations are not met, the market often experiences significant downward pressure.
Wall Street expectations:
Jan 2024 - CPI:
US's Jan 2024 - Core CPI data vs December's data.
January inflation at a glance:
(1) CPI.
Came in at 3.1% vs Wall Street expectations of 2.9%.
This was -0.3% lower than December 2023’s inflation data.
This was -3.3% YoY lower than January 2023’s data.
(2) Core CPI.
Came in at 3.9% vs Wall Street expecations of 3.7%.
It remains same as December’s inflation data (3.9%).
This was -1.7% YoY lower than january 2023’s data.
Main difference between CPI and Core CPI are the exclusion of (a) food and (b) energy elements when calculating core inflation data.
Logically speaking, it is the overlapping items used to derive both CPI and Core CPI inflation rates, that have “caused” inflation not to fall further.
My viewpoints: (mine & mine only)
CPI inflation data (Jan 2024) is still falling on a monthly basis.
Core CPI data, although has stagnated, it is at least not rising either.
The good news is the Fed does not rely solely on CPI & Core CPI when measuring US inflation.
Their "go-to" data is Personal Consumption Expenditures (PCE), which might offer a different perspective.
More important, will US’s core PCE for January 2024 show (a) a decline, (b) a rise or (c) flatline when it is released on 29 Feb 2024?
Looking at historical interactions between CPI and PCE, the directions between the two are consistent, the extent or magnitude (of rise & fall) varies. (see above).
It is possible the hot January CPI reading would not produce an equally hot core PCE deflator.
The confirmation will only be known, when January producer price index (PPI) is released on 16 Feb 2024.
As could be seen in above diagram, core PPI (purple) also trails both CPI & PCE movements.
So did you?
Out of curiosity, did you manage to pick up any US stock/s on Tuesday when US market was volatile?
Selectively, I picked up banking stock $UBS Group AG(UBS)$ when its price has dipped to my entry thresh point.
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Do you think CPI data release was an alarm like many?
Do you think PPI and PCE to be released on 16 Feb and 29 Feb will fan the flames of “fear” or rally US market to new heights?
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