Back to top

Image: Bigstock

Markets Surge on Record-High Inflation Data: Already Priced In?

Read MoreHide Full Article

On the back of record-high Producer Price Index (PPI) numbers this morning — as well as the first earnings miss for Wall Street banking giant JPMorgan (JPM - Free Report) in two years — markets surged higher, closing up +1% or more on the day. The Dow was the laggard at +1.01% (+345 points), while the S&P 500, with 9 of its 11 sectors finishing in the green, closed +1.12%. The Nasdaq won the day, +2.03% or +272 points, while the small-cap Russell 2000 continues its winning streak, +1.92%.

This breaks a three-day losing streak on the Nasdaq and S&P, as market participants begin to feel hawkishness from the Fed has been sufficiently priced into equities at this stage. For sure, investors have leveled expectations and are now primed to withstand aggressive Fed moves to upend inflation — and even inflation metrics themselves.

To wit, PPI numbers year over year for March were the highest on record and the markets shook it right off. In a way, we saw the reverse behavior we did yesterday, with a 40-year high Consumer Price Index (CPI) print being shrugged off ahead of the opening bell, only to turn on a sort of reckoning that the worst of this inflationary pain may yet be ahead of us. Whether we are indeed experiencing “peak inflation” won’t be known for certain until a few months from now, but investors have started betting that we are.

Employment data has been a key backstop to the narrative of an overall strong economy, and tomorrow we get new weekly jobless claims figures, which discern both new and existing unemployment. We’re now off recent lows, but those lows we saw a couple weeks ago harken back to the late 1960s, when our labor market was a vastly different place. In short, we’ve got about as strong an employment situation as we might expect, especially coming out of a two-year pandemic.

We also get new Retail Sales, Import Prices and University of Michigan consumer survey numbers tomorrow, making it an eventful day for additional economic data to inform where we’re headed. We’ve already baked-in a 50-basis-point interest rate hike from the Fed three weeks from now, so now it will be up to these economic reads, and a bevy of Q1 earnings reports to come, to help lead us through.

Questions or comments about this article and/or its author? Click here>>