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How We're Approaching the Post-CPI Action
Forecasts still call for a rate hike this month.
Danny Riley
July 13, 2023
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Our View
The ES traded up to a 16-month high yesterday and is now up 29% from its low and up 16.8% on the year. The Nasdaq is up a whopping 33% YTD. Tom Lee nailed the bullish outlook going into the CPI, with the ES closing 96 handles higher than the low we saw on Monday and as we continue to push higher in Globex.
Despite yesterday’s lower-than-expected CPI results — the four main inflation measures all came in below expectations — expectations for the Fed to back off this month’s rate hike haven’t come down.
A day ago, expectations for a 25 basis point rate hike stood at just over 94%. Currently, expectations stand at 92.5%. So a slight downtick, but a pretty near-certain outcome.
On the flip side, 10-year yields (TNX) have come under pressure and are into potential support (charted below). However, that dip was enough to send bonds and our TLT longs higher. Taking some heat off the bonds should help out tech and we’ll see if stocks can finish the week on an upbeat note.