Wednesday, March 12, 2025
This morning’s economic announcement is the key data point of the week, the Consumer Price Index (CPI) for February, including a new Inflation Rate. When they hit the tape, the already-green market indexes have fluctuated notably. Currently, the Dow is +250 points — it had blossomed up over 500 points for a brief period — while the S&P 500 is +56 and the Nasdaq is +280. The small-cap Russell 2000 is up +38 points at this hour.
It’s tough to discern motivation overall, however — how much of this morning’s appetite is due to sunken valuation levels on key stocks and how much is due to a mildly better CPI? Let’s examine:
CPI +0.2% for the Month, +2.8 YOY: Both Better than Expected
February CPI on headline month over month came in 10 basis points (bps) light of expectations to +0.2%. This is the lowest monthly print since July of last year, and breaks a three-month string of higher figures on this metric.
Core CPI month over month (stripping out food and energy prices) reached +2.8%, 10 bps below estimates and the lowest read since November.
Year-over-year CPI on headline is also known as the Inflation Rate, and here we see another 10 bps reduction from estimates: +2.8%. It breaks a four-month streak of higher Inflation Rates — from September 2024’s multi-year low +2.4%, the closest we’ve gotten to the Fed’s optimum inflation level of +2.0%.
Year-over-year core CPI was another 10 bps below expectations to +3.1%. This is off the previous month’s +3.3%, which was the highest print since May of last year.
It’s important to remember we’re looking at February numbers; if we are to see notable changes to these figures in March and beyond, they will much more likely be due to tariff initiatives from the current U.S. administration. Those numbers do not show up here. Interestingly, food prices only rose +0.2% in February, even with the Eggs category (officially under Meat, Poultry, Fish & Eggs) up +1.6% for the month.
Meanwhile, Airline fares were -4% for the month, either demonstrating the denouement of the “Revenge Travel” trend or a sign of overall cooling in consumer demand. Oil prices, and thus gasoline at the pump, were cheaper in February than they had been in previous months.
Overall, we’re still higher than where the Fed wants us to be — thus, at next week’s FOMC meeting we do not expect a move from the current +4.25-4.50% Fed funds rate, where we’ve been since the most recent 25 bps cut in December of last year. These numbers are not enough to shift sentiment toward a new cut until at least the May meeting.
What to Expect from the Stock Market Today
Market indexes are down between -2.5% and -4.5%, depending, over the past five trading days. Perhaps this will be the first up-day of the week, if not because these CPI numbers are so convincing than market participants are seeing some sweet value in lots of recently high-priced equities. The Wall of Worry does not come down, however, until we see how this new economic trajectory begins to pan out.
Questions or comments about this article and/or author? Click here>>
Image: Bigstock
CPI +0.2%, Inflation Rate +2.8%: Lower than Expected
Wednesday, March 12, 2025
This morning’s economic announcement is the key data point of the week, the Consumer Price Index (CPI) for February, including a new Inflation Rate. When they hit the tape, the already-green market indexes have fluctuated notably. Currently, the Dow is +250 points — it had blossomed up over 500 points for a brief period — while the S&P 500 is +56 and the Nasdaq is +280. The small-cap Russell 2000 is up +38 points at this hour.
It’s tough to discern motivation overall, however — how much of this morning’s appetite is due to sunken valuation levels on key stocks and how much is due to a mildly better CPI? Let’s examine:
CPI +0.2% for the Month, +2.8 YOY: Both Better than Expected
February CPI on headline month over month came in 10 basis points (bps) light of expectations to +0.2%. This is the lowest monthly print since July of last year, and breaks a three-month string of higher figures on this metric. Core CPI month over month (stripping out food and energy prices) reached +2.8%, 10 bps below estimates and the lowest read since November.
Year-over-year CPI on headline is also known as the Inflation Rate, and here we see another 10 bps reduction from estimates: +2.8%. It breaks a four-month streak of higher Inflation Rates — from September 2024’s multi-year low +2.4%, the closest we’ve gotten to the Fed’s optimum inflation level of +2.0%. Year-over-year core CPI was another 10 bps below expectations to +3.1%. This is off the previous month’s +3.3%, which was the highest print since May of last year.
It’s important to remember we’re looking at February numbers; if we are to see notable changes to these figures in March and beyond, they will much more likely be due to tariff initiatives from the current U.S. administration. Those numbers do not show up here. Interestingly, food prices only rose +0.2% in February, even with the Eggs category (officially under Meat, Poultry, Fish & Eggs) up +1.6% for the month.
Meanwhile, Airline fares were -4% for the month, either demonstrating the denouement of the “Revenge Travel” trend or a sign of overall cooling in consumer demand. Oil prices, and thus gasoline at the pump, were cheaper in February than they had been in previous months.
Overall, we’re still higher than where the Fed wants us to be — thus, at next week’s FOMC meeting we do not expect a move from the current +4.25-4.50% Fed funds rate, where we’ve been since the most recent 25 bps cut in December of last year. These numbers are not enough to shift sentiment toward a new cut until at least the May meeting.
What to Expect from the Stock Market Today
Market indexes are down between -2.5% and -4.5%, depending, over the past five trading days. Perhaps this will be the first up-day of the week, if not because these CPI numbers are so convincing than market participants are seeing some sweet value in lots of recently high-priced equities. The Wall of Worry does not come down, however, until we see how this new economic trajectory begins to pan out.
Questions or comments about this article and/or author? Click here>>