Analysts and talking head pontificators suggest a wide range of possibilities when the CPI number releases at 8:30 AM eastern.  Some say prepare for a powerful rally, while others suggest new market lows are on the way.  Still, others say the numbers will be confusing with contradictory results from the monthly to core numbers.  So, although the entire world is waiting and watching, the only thing that matters is how the market reacts to the data!  Plan for the price action to be initially volatile and dangerous except for the most experienced day traders.  After that, anything is possible but keep in mind the bigger picture of a slowing global economy and an aggressive FOMC rate increase just around the corner.

While we slept, the Asian market rose slightly with cautious hope waiting on the U.S. economic numbers.  European markets see modest gains across the board as they watch the U.S. inflation data report.  But, with bold anticipation, U.S. futures point to a substantial gap up open ahead of the CPI report.  However, anything is possible as the world reacts to the data.  So, expect some wild and challenging price action that could include some big point whipsaws as investors digest the numbers.

Economic Calendar

Earnings Calendar

Tuesday is another very light day on the earnings calendar with just 12 confirmed reports, most of which are tiny small caps companies.  So, the only marginally notable report will be from CNM today.

News and Technicals’

Peloton announced Monday that co-founder John Foley is resigning as executive chairman.  Chief Legal Officer Hisao Kushi, another co-founder, is also departing.  Uber veteran Tammy Albarrán will replace him.  The changes come as CEO Barry McCarthy orchestrates a massive transformation plan for the fitness company.  Nintendo said sales of Splatoon 3 in Japan surpassed 3.45 million units in the first three days since its Sept. 9 launch, marking a new record.  Nintendo shares rose 5% on Tuesday after the announcement.  Later Tuesday, the company will also hold its Nintendo Direct event, where it will reveal details of future games, which will help keep up the momentum for its aging Switch console.  Oracle came up short on profit, but its revenue met expectations.  The company closed its $28 billion acquisition of health data software maker Cerner in the quarter.  According to a statement, revenue growth in the quarter ended Aug. 31 accelerated from the 5% it posted in the prior quarter. 

Credit Suisse expects the Federal Reserve to pause interest rate hikes sooner than widely expected due to tumbling inflation.  As a result, according to the firm’s chief U.S. equity strategist, it will launch a powerful market breakout.  The August consumer price index will be released Tuesday at 8:30 AM.  ET, and it is expected to show inflation is moderating.  The report could be confusing because economists surveyed by Dow Jones expect headline CPI to decline by 0.1%, but it is expected to rise by 0.3%, excluding energy and fuel.  The report is seen as key guidance for next week’s Federal Reserve rate decision.  Still, economists say it is also critical for the longer-term view on interest rates since it could show whether some causes of inflation are receding.  Treasury yields moved very little early Tuesday, with the 12-month at 3.60%, the 2-year at 3.52%, the 5-year at 3.40%, the 10-year at 3.32%, and the 30-year at 3.48%. 

According to the vast amount of pontificators, the CPI number could plunge the market to new depths or send us into the stratosphere with a powerful rally!  But, no matter the number, the most important thing is how the market reacts.  One thing we can most likely count on is the reaction will likely create significant volatility rewarding some and punishing others at the open, which could be anything!  But, despite how the market reacts, it’s unlikely to deter the Fed from raising rates aggressively in the coming FOMC meeting but may affect future decisions.  In addition, the weakening global conditions and geopolitical issues will continue to be stumbling blocks we will have to deal with moving forward.  So, fasten your seatbelt, plan carefully and get ready for the fireworks to begin.

Trade Wisely,

Doug