CPI Cheat Sheet, Trade Updates, and Today's Must-Know Market Levels

Good morning all, and a happy CPI day to all who celebrate it.

The US Consumer Price Index data will be out in a few hours, which could have massive implications for interest rate expectations and US stock prices. In this article, we’ll discuss analyst expectations, and potential market reactions, and provide updates on last week’s trade recommendations (so far, so good).

Analysts Forecast

**CPI measures the cost of living for the typical person **Core CPI is the CPI minus energy and food prices.

Thanks to surging energy prices (discussed here), today’s headline CPI for August is expected to print a whopping +0.6% MoM, the largest monthly jump in June 2022, lifting the annual inflation rate to 3.6% from 3.2% in July. Not to mention, Oil is up another 7% so far this month, meaning headline inflation will likely accelerate in the months ahead.

JPM’s Market Intel team lays out the following reaction functions for today’s data:

Headline MoM prints above 0.7% (Probability 5%)
SPX down 2-2.5%
Between +0.55% - 0.7% (Probability 27.5%)
SPX down 1-1.5%
Within 5bps of consensus, +0.5% (probability 45%)
SPX up 25bp – 75bps.
Between +0.3% - 0.45% (Probability 20%)
SPX up 1.25-1.75%
Below 0.3% (Probability 2.5%)
SPX up 2-3%

While the JPM estimates give us an idea of how the CPI impacts markets (CPI higher = Market lower and vice versa), analyzing the dealer gamma profile is even more useful.

SPX Key Support/Resistance Levels Based on Dealer Gamma Exposure