Why This Week’s Inflation Report Might Significantly Impact the Market

Inflation is anticipated to become a significant concern for the market again this week with the release of September’s data, as indicated by Bank of America. In a note issued on Monday morning, the financial firm’s trading desk reported that the predicted market movement for stocks surrounding Thursday’s consumer price index (CPI) release has surpassed 1%, compared to a realized movement of 0.7% over the preceding three months. Recently, inflation has been on a downward trend, with both investors and the Federal Reserve concentrating more on a possible labor market slowdown. However, last week’s unexpectedly strong jobs report has disrupted the prevailing economic outlook. The Bank of America note stated that following the substantial jobs report, the CPI is now a noteworthy event. It suggested that while stocks might handle a slight increase in inflation, a significant surprise could lead to increased volatility. Additionally, long-term Treasury yields rose on Monday, indicating possible renewed fears about inflation. The CPI report is scheduled for release before the market opens on Thursday. Economists surveyed by Dow Jones anticipate that the CPI report will reflect a 0.1% increase for September and a 2.3% rise compared to the previous year. Expectations for the core CPI, excluding volatile food and energy prices, are projected at a 0.2% increase month over month and a 3.2% rise year over year.

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