Wednesday's March consumer price index report could play a pivotal role in the next stage of the stock market rally, according to Fundstrat's Tom Lee. "Bottom line: We see probabilities favoring a rally in stocks post-March CPI report," the head or research wrote in a note to clients Sunday. Recent data trending above expectations and higher oil prices have fueled worries on Wall Street that inflation is reaccelerating after a period of downward momentum, Lee noted.
But the March inflation print should represent the first solid reading of the new year, given that January inflation numbers typically struggle with poor seasonal adjustments, made worse by "the pandemic and subsequent wild goods prices swings," while February is distorted by "residual seasonality issues - meaning, price increases in January spill into February," Lee wrote. "Thus, March is first clean CPI print of 2024," he said.