In the previous day, the New York market bet on this reduction in inflation with profits. The Dow added 1.5% while the S&P 500 and Nasdaq added 1.4% and 1.2% respectively. All the major sectors of the S&P 500 closed higher, led by the energy sector.
For their part, yields on US Treasury bonds fell sharply after the data was released. US 10-year Treasury yields – which move inversely with prices – fell about 15 basis points just after the data was released, then trimmed the decline to 10 and traded at 3.453%.
The two-year yield, which tends to better reflect expectations for monetary policy, fell more than 20 basis points to 4.2%.
The market had put its trust in the forecasts that analysts had for inflation in November, and the data has not disappointed them. If a reading of 7.3% was expected in the interannual CPI data, the data is finally 7.1%, the lowest in a year and registering its fifth consecutive fall. In monthly terms, it rises 0.1%, compared to the 0.3% that the market had handled.
While this still leaves inflation well above the Federal Reserve’s 2% target, it could justify a slowdown in the pace of monetary tightening. For the moment, operators are forecasting a 50 basis point rise in interest rates, a slight moderation compared to the four previous rises, of 75 points. They will also keep an eye on updated economic projections and remarks from Chairman Jerome Powell’s press conference.
Ellen Zentner, Morgan Stanley’s chief US economist, now sees even smaller Fed rate hikes, 25 basis points at the February meeting, and none in March, leaving the top federal funds rate at 4 .6%
“Today’s US CPI data will give us an idea of how market prices for the Federal Reserve terminal rate will clash with the dot chart projections coming out tomorrow, and that will, in all cases, crush any sentiment. potentially bullish on the market,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank. “So even if we see a great CPI print and a good market rally today, it may not extend beyond the Fed’s decision on Wednesday.”
“I think the market, as it has done before, is betting, in my opinion, too big on some type of Fed pivot and this rebound that we’ve had today is fragile at best.”agreed Kevin Philip, a partner at Bel Air Investment Advisors.
Source: Ambito
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