Jump to content

US Inflation Cools to 8.3% but Eases Less than Forecast, Nasdaq 100 Sinks as Yields Rise


Recommended Posts

US INFLATION KEY POINTS:

  • April U.S. Consumer Price Index rises 0.3% on a seasonally adjusted basis and 8.3% in the last 12 months, slightly above expectations
  • Core inflation advances 0.6% month-on-month and 6.2% from a year earlier, also topping forecasts
  • Nasdaq 100 futures erase gains and plunge into negative territory as data suggests inflation is struggling to come down materially
US Inflation Cools to 8.3% but Eases Less than Forecast, Nasdaq 100 Sinks  as Yields

Most Read: S&P 500, Nasdaq 100 Outlook - US Inflation Data to Make or Break the Market’s Spirit

U.S. inflation moderated last month in annual terms, but remained at multi-decade highs and more than four times above the Federal Reserve’s 2% target, data released by the Labor Department showed on Wednesday.

According to the agency’s latest report, the consumer price index, which measures a comprehensive range of goods and services, grew 0.3% in April after soaring 1.2% in March, bringing the 12-month reading to 8.3% from 8.5%, a sign that inflationary pressures reached the cycle’s peak at the end of the first quarter, but are still struggling to cool materially. Analysts surveyed by Bloomberg News had forecast CPI to rise 0.2% m-o-m and 8.1% y-o-y.

US Inflation Cools to 8.3% but Eases Less than Forecast, Nasdaq 100 Sinks as Yields Rise

Source: DailyFX

Focusing on the monthly drivers of the headline figure, food prices climbed 0.9%, in line with the recent pace of increases in this category. Energy costs, meanwhile, fell by 2.7% after notching an 11% gain in March on soaring oil prices following Russia's invasion of Ukraine. This is a positive development, as it indicates that the worst of the commodity market shock may be over.

Excluding food and energy, so called core CPI, which tends to reduce transitory noise and reflect longer-running trends in the economy, advanced 0.6% on a seasonally adjusted basis and 6.2% from a year ago. The slowdown in the yearly figure, which came down from 6.5%, appears to confirm the theory that the core gauge also reached its highest point in March.

CPI components

Source: US Bureau of Labor Statistics

In terms of monthly contributors for the core indicator, the shelter index rose 0.5%, matching the previous two months’ increase, amid a tight rental market. Meanwhile, transportation remained hot and jumped 3.1%, reflecting a rotation of household demand toward services consumption. In contrast, used cars and trucks continued to roll over, falling 0.4% after a 3.8% decline in March amid cooling demand and softening durable-goods prices.

With inflation slowing but not coming down materially, it is not certain that we have reached the peak of central bank policy outlook hawkishness. Against this backdrop, yields may continue to reprice higher on expectations of a more front-loaded tightening response. This scenario may exacerbate fears that the Fed’s hiking cycle will trigger a recession, undermining sentiment and complicating the equity market recovery.

Immediately after the CPI figures crossed the wires, U.S. Treasury yields jumped, prompting the Nasdaq 100 futures to erase all pre-market gains and to sink more than 1% into negative territory. Fed officials have indicated that they endorse front loading interest rate hikes in half a percentage point increments, but have shown little appetite for larger adjustments. However, faced with unrelenting inflation, the bank may ultimately deploy supersize 75 basis points hikes in coming meetings in a move to bring monetary policy to a neutral stance more quickly. This poses a significant risk for stocks.

Nasdaq 100 futures

Nasdaq 100 Chart Prepared Using TradingView

EDUCATION TOOLS FOR TRADERS

  • Are you just getting started? Download the beginners’ guide for FX traders
  • Would you like to know more about your trading personality? Take the DailyFX quiz and find out
  • IG's client positioning data provides valuable information on market sentiment. Get your free guide on how to use this powerful trading indicator here.

---Written by Diego Colman, Market Strategist for DailyFX. 11th May 2022

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      23,569
    • Total Posts
      96,877
    • Total Members
      44,143
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    crh_55
    Joined 29/11/23 20:23
  • Posts

    • Investing in crypto could be challenging especially the Fear of Missing out Lambo. This mostly affect traders trading strategy and ideology. Predicting the right time to buy is always cumbersome and that is why many analyst advise DCA because it curtails FOMO and gives you a long-term crypto trading mentality. In crypto Dollar Cost Averaging involves investing the same amount of money in a target token at regular intervals over a certain period of time, regardless of price. This will help to control volatility on your portfolios and minimize FOMO For example when you decide to invest $100 on a token and invest $10 daily or weekly or monthly till you fulfilled you $100 target investment on the token irrespective of the price of the token. This strategy helps a crypto trader to build his portfolio over the long term thereby he/she is not bothered by short-term volatility in the broader markets. This strategy mostly favours low-budget traders in building a strong portfolio but the problem most normally encounter is exchange minimum trading amount. One analyst advised on how to mitigate this was to accumulate on exchange that has lower trading fees and later send to where you desire to hold. He also noted that some of this exchanges are good in listing good projects for you to be among the early birds. Do you think DCA is the best method to accumulate token and which exchange offers the lowest tradeable balance and trading fees?
    • DXY   now wait for confirmation or rejection 
    • Messi has written his name in the sands of time. I dare say he is immortal, he has challenged and excelled all limits to the point he is now the new limit. This partnership is GOATED cos it has brought more exposure for the exchange considering MESSI's popularity.    
×
×
  • Create New...
us