CPI Day: How it Has Evolved to Have Less Impact on the Stock Market
The release of the monthly consumer-price index (CPI) readings used to send the U.S. stock market on a wild ride, but things have changed in 2023. The market’s reaction to CPI data has become much more subdued.
According to data compiled by Dow Jones Market Data, in 2022, the S&P 500 saw an average percentage move of 1.9% on CPI release days. The median move was a 1.7% change. The biggest jump occurred on November 10, 2022, with a 5.4% increase following the October CPI reading. In contrast, the largest drop was a 4.3% decline on September 13, 2022, after the August CPI report revealed an unexpectedly sharp rise in the core rate.
So far in 2023, the market’s reactions to CPI data have been much milder. Out of the 12 CPI reports, only one resulted in a sharp move, with the S&P 500 rising nearly 1.5% on March 12. This occurred despite the February reading showing little sign of inflation pressure slowing down. The average move on a CPI release day in 2023 has been 0.62%, with a median move of 0.45%.
As we wait for the release of the July CPI report on Thursday, stocks seem to be in a holding pattern. The S&P 500 was down 0.1%, while the Dow Jones Industrial Average traded near unchanged.
Economists polled by The Wall Street Journal expect the July CPI data to show a 3.3% year-over-year rise, up from the 3% reading in June. However, the core CPI rate, which excludes volatile food and energy prices, is expected to slow down to 4.7% from 4.8%.
It seems that the U.S. stock market has settled into a state of relative calm when it comes to CPI data. Investors are no longer as moved by the monthly fluctuations in consumer prices. While this may be a welcome relief for some, it is also a reminder that the stock market is driven by multiple factors and that there is no one-size-fits-all approach to investing.
As we continue along the road of lower inflation, traders are keeping a close eye on the CPI data to gauge the health of the economy and make informed investment decisions. Only time will tell how the market will respond to future CPI releases, but for now, it seems that CPI Day is not what it used to be.
Michael DeStefano contributed to this article.
Analyst comment
Neutral news.
As an analyst, the market is expected to remain relatively stable and unaffected by the CPI data release. Investors have become less reactive to monthly fluctuations in consumer prices, indicating that other factors are driving the stock market. Traders will still monitor CPI data to make informed investment decisions.
