The Stock Market May Care More About Tomorrow's CPI Report Then You Think

#Stocks –

#Macro – $SPX, #VOLATILITY, #CPI

Mike’s Reading The Markets Macro Subscription Service on Seeking Alpha

It was a rather unremarkable, boring day on the surface, with the S&P 500 finishing down 11 bps. Implied volatility for tomorrow was sharply higher today, especially as the day went on. The VIX 1 Day today surged by 6 points to close at 18.60, its highest close since the end of October. The equity market cares about tomorrow’s CPI report.

This means that the knee-jerk reaction to the CPI report can cause implied volatility to fall once event risk has passed and that a decline in implied volatility could initially push markets higher. So, one needs to be careful how they interpret the CPI results and be aware of the potential volatility crush, sending stocks higher. But the elevated 1-day VIX index is clearly a sign that the market does care, and there are some worries around this report.

The cleanest signal for an after-market response will likely come from the dollar and bonds. Those will give a much better indication of the market’s view on the CPI report.

Analysts see CPI rising by 3.1% y/y, in line with January, and by 0.4% m/m, up from 0.3%. Core CPI is expected to rise by 3.7% y/y down from 3.9%, while rising by 0.3% m/m down from 0.4%. I have nothing new in the way of data regarding CPI swaps, which are still trading when rounded to the nearest tenth at 3.2% y/y and 0.5% y/y, and higher than analysts’ forecasts.

I don’t have much else to add at this point.

-Mike

Michael Kramer publishes independent macro and options research read across 10+ platforms and by institutional desks.

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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.

This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.

The Stock Market May Care More About Tomorrow’s CPI Report Then You Think