The U.S. inflation data is expected to come in on Thursday with a consensus pointing to the prices slowing down by 0.5 percentage points to 6.6% from a year earlier, which would be gauged by the central bank for its next policy meeting in February.
Average inflation rate in 2022 would be around 8% if the final reading in December is in line with the forecast. However, it is still far higher than the Federal Reserve’s target of 2.0%.
According to JPMorgan’s game plan ahead of the announcement of inflation data, the firm gives the highest probability of 65% that the CPI reading in December could be around 6.4-6.6%. If that is the case, it expects S&P 500 to edge higher by 1.5-2.0% on the following trading session.
There is also a 20% chance that the reading could be below 6.4%, which could boost the market significantly by 3-3.5%. However, if the inflation rate comes in above the consensus of 6.6%, which has a 15% probability, the S&P 500 will react negatively by 2.5-3%.
The index level at 4,000 is probably the next big resistance level for the market, with S&P 500 staring at both the year-long downtrend line & the 200-day moving average.
The U.S. central bank raised interest rates seven times in 2022 for a total of 4.25 basis points, taking the fed funds rate to 4.25%-4.5%.
However, the market anticipated that the Fed would not stop there as inflation remains higher than the target rate by the central bank. A 50-75 basis points are expected to be added this year before the Fed starts pivoting.
Current inflation indicates that it is possible for the Fed to reduce some of the rates to a landing around 4.5-4.75% by the end of this year.
As of 11:30 local time in BKK, Dow Jones rose 95.55 points or 0.28% to 33,799.65 points. S&P 500 gained 0.55% to 3,940 points, and the tech-heavy Nasdaq increased 0.88% to 10,836.75 points.
