Lagging CPI Defines Wall Street Open

It has been a tight week for the S&P 500 and DJIA. Wall Street has been quiet as traders have dealt with a collection of uncertainties.

Written by: Dime Levov • Thursday, October 10, 2019 • 1 min read

• Last updated: Thursday, October 10, 2019

This morning’s Wall Street open has turned relatively positive. For the first half-hour of trade, the DJIA DOW (+150), S&P 500 SPX (+16), and NASDAQ (+50) have reversed opening losses. Traders are pricing in the lagging U.S. CPI numbers released during the pre-market hours and the likelihood of more FED easing.

Sub-par inflation has been a prominent concern throughout 2019. Due to meet on 30 October, the FED is coming off two consecutive ¼ point rate cuts; is Jerome Powell and the FOMC preparing for another ¼ point reduction in the Federal Funds Rate?

The odds of a late-October cut are growing more probable by the day. Today’s CPI numbers have given the FED even more supporting evidence:

Event Actual Projected Previous

CPI (MoM, Sept) 0.0% 0.1% 0.1%

CPI (YoY, Sept) 1.7% 1.8% 1.7%

Core CPI (MoM, Sept) 0.1% 0.2% 0.3%

Core CPI (YoY, Sept) 2.4% 2.4% 2.4%

In total, today’s figures have disappointed Wall Street expectations. Perhaps the only saving grace is Core CPI holding firm on a yearly basis. This is fair news, even though the intermediate-term inflationary downtrend remains intact.

A Muted Wall Street Open For U.S. Stocks

The December E-mini S&P 500 is showing signs of life after a negative overnight session. At this point, it appears that traders are excited about an abundance of cheap money hitting the streets in Q4 2019.

Wall Street stocks — December E-mini S&P 500 Futures (ES), Daily Chart

Here are two resistance levels to watch in this market as the session progresses:

Resistance(1): Bollinger MP, 2945.25
Resistance(2): Daily SMA, 2993.00

Overview: It has been a tight week for equities as traders have dealt with a collection of uncertainties. However, one thing is for sure: low inflation is a problem and one that will be addressed by the FED. As the odds of another rate cut grow, be on the lookout for the S&P 500 to revisit the 3000.00 handle.