U.S. inflation reports are no longer eliciting the outsize swings in U.S. stocks that investors witnessed during 2022. One longtime stock-market strategist and trader offered an explanation in an interview with MarketWatch.
The S&P 500 recorded its biggest daily swings of 2022 following the release of monthly CPI numbers, including on Sept. 13, when hotter-than-expected August data sent the S&P 500 down 4.3%, and on Nov. 10, when weaker-than-expected October numbers helped send the large-capitalization index rallying 5.5%.
The S&P 500 logged an average swing of 0.8% in response to PPI data released in 2022. But the average move following the release of PPI data in 2023 has increased to 1.2%. The next PPI report will be released Thursday. That prediction ended up being way off base. Instead, the Fed delivered another 25 basis point hike at its February meeting, bringing the upper bound of its target range to 4.75%. It followed that with another 25 basis point hike in March, bringing the target to 5%.
“The Fed moved way faster than markets had priced in,” Sosnick said. “That really freaked people out.”
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