How the Stock Market Behaves When a CPI Report and a Fed Decision Happen on the Same Day

How the Stock Market Performed on CPI and Fed Days in 2024. – Getty Images

Wall Street is bracing for a rare double-episode of economic events that will influence markets on Wednesday, with the May consumer price index expected in the morning and the Federal Reserve’s policy announcement in the afternoon.

CPI days and Fed decision days both have a reputation for volatility in markets, but they rarely coincide. The CPI report and the Fed policy meeting have fallen on the same day only 13 times since 2008, according to Dow Jones Market Data.

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Although the sample size is small, all three major stock indexes tended to post gains on those days, with the S&P 500 SPX rising an average of 0.7%, the Dow Jones Industrial Average DJIA adding 0. 9% and the Nasdaq Composite COMP increasing by more than 1%. %, according to Dow Jones Market Data (see table below).

SOURCE: DOW JONES MARKET DATASOURCE: DOW JONES MARKET DATA

SOURCE: DOW JONES MARKET DATA –

Despite Wednesday’s rare event, some strategists don’t expect more volatility than usual in the stock market.

Dave Sekera, chief U.S. market strategist at Morningstar Research Services, said things that could lead to higher volatility on Wednesday would be if Fed Chairman Jerome Powell “says something unexpected” during his press conference half an hour after the publication of the central index. the bank’s policy statement and economic forecast updated at 2 p.m. Eastern time.

“But I think it’s a very low probability because it’s [Powell’s] always very measured in his comments,” Sekera said in an emailed comment Monday.

MarketWatch live coverage: May CPI report: Investors focus on core after string of hot numbers

The CPI, a measure of what Americans pay for goods and services, remained unchanged in May for the first time in nearly two years, the Labor Department reported Wednesday. It was lower than the forecast of a monthly increase of 0.1%, according to economists polled by the Wall Street Journal.

The “core” inflation rate, which excludes volatile food and energy prices and is watched more closely by economists and the Fed, rose a modest 0.2% last month . This is the lowest gain in seven months.

The annual increase in the headline figure slowed to 3.3% from 3.4% the previous month, while the base rate slowed to 3.4% from 3.6% in the 12 months ended May, according to the Ministry of Labor.

See: Good news on inflation? The CPI could show signs of falling prices.

Sekera and his team said that if inflation indicators were in line or better than expected, it could give positive sentiment to the market, but given the high valuations in the market at present, they do not see “a great upside potential in the short term. for US stocks.

U.S. stock index futures jumped Wednesday morning. Dow Jones Industrial Average YM00 futures rose more than 300 points, or 0.8%, while Nasdaq-100 NQ00 and S&P 500 ES00 futures each rose 0.9%, according to data from FactSet.

MarketWatch live coverage: Fed Meeting: Dow Jones Futures Up 250 Points After CPI Data as Investors Wait for Rate Cut Guidance

The S&P 500 and Dow industrials averaged slight declines of 0.02% and 0.18%, respectively, over the last five days of CPI this year. This contrasts with their 10-year averages of a 0.02% gain and 0.06% decline on CPI days.

So why this reputation for volatility?

Daily volatility in the CPI played out in 2022 as inflation numbers triggered the start of the Fed’s rate hike cycle. The S&P 500 saw an average percentage change – up or down – of 1.9% on CPI release days in 2022. The median change was a change of 1.7%, according to Dow Jones Market Data.

Daily CPI volatility moderated in 2023, but was significant this year. The chart below shows that the S&P 500 and Nasdaq have seen movements of about 1% in either direction in four of the last five CPI reporting days so far this year, according to Dow Jones Market Data.

SOURCE: DOW JONES MARKET DATASOURCE: DOW JONES MARKET DATA

SOURCE: DOW JONES MARKET DATA –

See: Fed won’t change interest rates this week, but meeting will still be a treat for economists

At the same time, the performance of stock markets during Fed policy decisions has also painted a confusing picture this year. The S&P 500 and Dow industrials rose more than 1% on March 20 while all three major indexes finished at their record closing levels after the Fed reiterated the prospect of three rate cuts in 2024 .

However, the S&P 500 has only seen an average gain of 0.1% over three Fed decision days this year, while the Dow and Nasdaq have each seen an average decline of around 0.4 % over the same period, according to Dow Jones Market Data (see table below). .

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SOURCE: DOW JONES MARKET DATASOURCE: DOW JONES MARKET DATA

SOURCE: DOW JONES MARKET DATA –

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