Inflation Surges and Market Reactions
Unexpected March Inflation: The March consumer inflation report took markets by surprise with a higher-than-anticipated surge. This development has led to a reassessment of the Federal Reserve’s interest rate cut expectations, with a June rate reduction now seeming increasingly unlikely.
CPI and Core Figures: The consumer price index (CPI), a critical inflation measure, rose by 3.5% year-on-year last month, outpacing February’s 3.2% increase and exceeding the 3.4% forecast. Moreover, the core CPI figure, which excludes volatile food and fuel prices, remained high at 3.8%, contrary to expectations for a slight decline.
Market Reactions: Following this robust inflation data, futures markets have adjusted to anticipate only 40 basis points of rate cuts throughout the year, a sharp decline from the 150 basis points projected at the start of 2024. Major financial institutions like Goldman Sachs and UBS have consequently pushed back their forecasts for the Federal Reserve’s first rate cut to July and September, respectively.
Fed’s Inflation Dilemma: This persistence of inflation is seen as a significant challenge for the Federal Reserve, complicating its path to reducing rates while aiming to ensure inflation moves sustainably towards its 2% target. Analysts express concerns that inflation may not be on a slowing trend, raising doubts about near-term rate cuts.
U.S. Producer Prices: Attention now turns to the release of U.S. producer prices later today, with investors seeking more clarity on March’s inflation dynamics. Expectations point to a rise in the headline annual figure and a slight increase in month-on-month prices, excluding food and energy.
Equity Market Outlook: U.S. stock futures show little change as investors await further inflation reports, following a sharp decline in Wall Street indices in response to Wednesday’s CPI data. The anticipation of March producer prices and corporate earnings from key players adds to the cautious market sentiment.
ECB Rate Decision: The European Central Bank’s upcoming rate-setting meeting is another focal point, with the market consensus leaning towards unchanged borrowing costs. However, investors will closely watch ECB President Christine Lagarde’s comments for hints of a possible rate cut, given the eurozone’s economic stagnation and near-target inflation levels.
Earnings Season and S&P 500 Outlook: The corporate earnings season kicks off with expectations of modest growth. Notably, Delta Air Lines has projected a strong upcoming quarter, while Wells Fargo has raised its S&P 500 target, suggesting a positive market outlook despite Federal Reserve policy uncertainties.
Oil Market Watch: In commodities, oil prices have seen a slight increase amid ongoing tensions in the Middle East, which continue to threaten supply security. The situation remains volatile, with potential impacts from regional conflicts and the latest U.S. oil inventory reports showing significant stockpile growth.
Last nights chat tickers results (more posted in chat so take a look)
$BA- Last 6 ratings were downgrades at an average of $235 a share
-All indicators flashing bearish
-9 million shares short (2%)
-Forward PE of 26
-Short Target $120 – Long Target $260
$NFLX- Bullish Trend still in tact and fundamentals are solid
-PE is 51 – Forward PE is 29
-7 million short (2%)
-Long Target $650 – Short Target $600
$ROKU/ $MARA Not touching these
$PANW- At major support so entry here with tight stop can be lucrative.
-PE is 44
-12 million short (4%)
-Long Target $380 – Short Target $280
Today I’ll be looking to scalp AAPL and BABA calls. Yesterday we scalped them for great gains in chat. See you there shortly…
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