According to JPMorgan, the upcoming consumer price index report is crucial for market movements, with economists expecting a 0.1% increase in headline CPI for July, resulting in a 12-month gain of 3.4%. Core CPI, which excludes food and energy prices, is projected to rise by 0.2% from June and 2.5% year-over-year.
The Federal Reserve is closely watching these inflation figures to assess the likelihood of a rate hike at its September meeting, with current futures pricing in a nearly 52% chance of an increase.
JPMorgan's trading desk noted that the U.S. has managed to avoid an inflation spike from ongoing Middle East conflicts, but the market is eager to see if core inflation remains persistent or if disinflation is on the horizon.
They provided potential scenarios for the S&P 500 based on core CPI movements: a core increase above 0.3% could lead to a decline of 1.5% to 2.5%, while a rise between 0.2% and 0.25% could result in a modest gain of 0.25% to 0.75%. The analysis highlights the importance of the CPI data in shaping market expectations and investor sentiment