Trading CPI: What JPMorgan sees the market doing Wednesday on these scenarios

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This will be the first CPI report since the Federal Reserve's meeting last month, when the central bank hiked rates by another 25 basis points.

The latest reading on the U.S. consumer price index is slated for release Wednesday, with economists polled by Dow Jones expecting a year-over-year gain of 5% for April. This will be the first CPI report since the Federal Reserve's meeting last week, when the central bank hiked rates by another quarter percentage point . Given this backdrop, JPMorgan's sales and trading team broke down five possible scenarios for how the stock market might react: 50% chance — CPI between 5% and 5.

5%: "This scenario would be a shock to the markets, but it seems unlikely that we experience a significant sell off since the spike in yields is likely muted given the bond market's fears surrounding bank contagion and the debt ceiling," JPMorgan said. The S & P 500 would lose 0.75%-1.25% under this outcome, the traders said. 20% chance — CPI between 4.7% and 4.9%: This would give investors hope that the Fed tightening cycle is complete, JPMorgan said.

 

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