Stock and bond investors expecting a “watershed” moment in Wednesday’s inflation data were left disappointed, analysts and economists said, leaving open the debate over whether the market is close to putting in a bottom.
The April consumer price index was certainly hotly anticipated, attracting the sort of pre-release scrutiny usually reserved for items like the monthly jobs report. Technical analyst Jeff deGraaf, founder of Renaissance Macro Research, called it one of the most hotly anticipated CPI reading in his more-than-30-year career.
And why not? Investors were looking for confirmation that inflation was finally cooling off after running at its hottest in more than 40 years — beyond the career memory of the vast majority of Wall Street veterans.
Moreover, the data was coming amid a selloff for stocks and bonds that’s been tough on investors in 2022 as they fret over the Federal Reserve’s ability to get a grip on inflation while avoiding the dreaded “hard landing” for the economy.
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Perhaps evidence of an inflation peak would help steady the ship, investors may have hoped, offering a clearer view on the path ahead for the Federal Reserve as it moves to jack up interest rates and shrink its balance sheet in an effort to rein in price pressures.
In the end, the data was somewhat anticlimactic. Yes, inflation slowed, with the annual pace at 8.3% versus the March reading of 8.6%. But it was still plenty hot, and above expectations for a reading of 8.1%.
More problematic for investors was the core reading, which strips out volatile food and energy prices. It showed a 0.6% monthly rise versus a Wall Street forecast for a 0.4% increase. The increase in the core rate over the past year also slowed to 6.2% from from a 40-year high of 6.5% in March.
Investors don’t seem that soothed. U.S. stock-index futures immediately wiped out strong gains to turn lower ahead of the opening bell. Equities did bounce higher once cash trading opened, but turned lower in afternoon trade.
The Dow Jones Industrial Average
DJIA,
was fell more than 200 points, or 0.6%, while the S&P 500
SPX,
which closed at a 13-month low Monday dropped 1%. The Nasdaq Composite
COMP,
which fell into a bear market earlier this year, was down 2.6%.
Treasurys have also seen choppy trade, but signs of an inflection point that would mark a lasting pause or a significant reversal in the selloff that drove yields to 3 1/2-year highs this month were also lacking.
“So far, at least, tentative evidence of a peak in inflation in today’s U.S. consumer price index report has not been a watershed moment for U.S. government bonds or equities,” said John Higgins,…
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