Wall Street Is ‘Immune’ to Inflation, Expects CPI to Beat Estimates Without Impacting Stock Market
BlockBeats News, September 10th. The trading desks on Wall Street expect that the U.S. Consumer Price Index (CPI) to be released this Thursday will show inflation data running hot. However, as employment data has become the core of the market narrative, they do not anticipate significant stock market volatility. Stuart Kaiser, head of equity derivatives trading strategy at Citigroup, stated that options traders are betting on the S&P 500 index to fluctuate around 0.7% in both directions after the CPI release. This is lower than the actual average volatility of 0.9% on CPI release days over the past year and lower than the market's volatility expectations for the next employment report on October 3rd.
Kaiser even believes that this implied volatility is still too high. All of this is related to how traders are extrapolating the Federal Reserve's interest rate path. U.S. employment data has shown signs of economic growth weakness, hence the market expects the Fed to cut the federal funds rate by 25 basis points at the end of the September 17th meeting and potentially continue rate cuts at the October and December meetings. (FX678)
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