Market Bounces Higher Into CPI Report

Market Bounces Higher Into CPI Report

This is the last “playoff” week of the 2022 trading year with significant economic news events affecting how the stock market moves through the end of the year. 

Ahead of these catalysts, the market started slow once the opening bell sounded on Monday. There was some early divergence between the Nasdaq and the Dow Jones, causing the S&P 500 to trade sideways at the open. The Nasdaq was noticeably weaker than the Dow Jones as it pushed higher, showing strength early. 

After the divergence started to unfold, the Nasdaq found some strength, with buyers stepping in to bring the index higher along with the Dow. At this point, all indices began to move in tandem which allowed the S&P 500 to move higher. 

Throughout the rest of the day, the market steadily pushed higher with little resistance. During power hour, the last hour of the market open, the market began to soar. There was more volume seen in the final hour than on average throughout the day, and this caused the market to rocket higher into the close. 

This close was likely big money on Wall Street getting their final positions before the catalysts begin to kick off.

CPI, Fed lead news catalysts for this week

The last U.S. Consumer Price Index (CPI) report of 2022 will be released tomorrow at 8:30 a.m. Eastern. This data is expected to not only set the tone for next year but also influence the decision by the Federal Reserve (Fed) on Wednesday when the central bank announces the Federal fund rate decision. The median forecast for the year-over-year CPI is at 7.3%. 

Any number above the expected 7.3% can make this market tumble. The market has reacted negatively to economic data coming in hotter than expected. Conversely, the market can explode higher if the numbers show below 7.3%. 

This report will go hand-in-hand with the next big catalyst of the week, the Fed decision on Wednesday at 2 p.m. Eastern. If the Fed does indeed lower the rate of increase, the market should react positively. If the Fed pivots on its plans, the market will likely not take a liking to that news.

Powell to speak on Wednesday

After the announcement on rates, Fed Chairman Jerome Powell will speak and take questions starting  at 2:30 p.m. Eastern. Wall Street will be all ears as what Powell says can quickly cause movement in the stock market. 

If Powell announces lower rates but plans on continuing with rate hikes in the future, this may dampen the positive catalyst. If Powell comes out and says that the Fed is done raising rates, this can prime the S&P 500 to explode. 

Stock market rallies into latest CPI report

The Nasdaq and the S&P 500 were positive to close the session. The S&P 500 futures closed up 1.27%, gaining 51 points, while the Nasdaq futures closed up 1.09%, an increase of 128 points. The Dow Jones futures followed, closing up 1.43%, adding 482 points.