Markets Have Wild Ride After Hot CPI Report

Well, that was a truly hectic week in markets. If you don’t like the direction prices are going, just wait a few minutes. The CPI came in hot. It was up 8.2% on a YoY basis and 0.4% for the month, which was above the 0.3% estimate. The report was ugly. Core inflation showed unexpected strength and went up 0.6% against the 0.4% estimate. Futures tanked, and it looked like it was going to be an ugly day. We were right in the middle of our research meeting, and when we emerged, markets had made a serious turn positive and rallied into the close. As Mark Newton said during the meeting, markets have been known to bottom on bad news. There was colossal upside volume. Mr. Newton also mentioned the enormous low to high range was a positive from a technical perspective.

Then on Friday, the S&P 500 opened lower, started to turn a bit higher, and bled down all the way to close at the day's lows. Other things in the morning rattled stocks. However, after the University of Michigan Consumer Sentiment Survey showed increasing inflation expectations, markets moved to the day's lows into the close. The Fed has gotten a hot jobs number, a hot CPI number, and rising consumer inflation expectations going into its next meeting in the first days of November. Markets are understandably o...