The US CPI data was positive but lower-than-expected

By: Miguel A. Rodriguez

12:55, 12 May 2022

The CPI fell to 8.3% and the underlying one to 6.2%, higher than the average market forecasts

The immediate market reaction was negative, with US indices retreating sharply and the 10-year bond yields rising to 3.04%.

But the truth is that the CPI figure shows signs of decline for the first time, and although not as much as expected, it may be the first symptom that inflation is reaching a peak. However, it has not worsened in April.


These types of immediate reactions after publishing a relevant figure, like yesterday's, are quite common. The market responds negatively with orders guided by algorithms to a figure less positive than expected without a deeper analysis of the true meaning of the data.

It is also usual that after a more detailed analysis, the market acts in the opposite direction, as it happened yesterday in the case of stock indices; this happened only for a short period.


Bond yields returned to their starting point, the US 10-year to the 2.92% zone. The Wall Street indices were sold off strongly after a brief subsequent recovery.

The negative correlation between treasury bond yields and stock indices that had been going on for weeks unraveled yesterday. Even though long-term interest rates remained low, perhaps because of the falling inflation data, the stock markets experienced a pronounced decrease, especially the Nasdaq, which lost almost 3%.


The question that arises from this behavior among market analysts is whether investors' concerns are no longer related to higher interest rates but to a deep slowdown in the economy. The growth data and the economy’s leading indicators published will become relevant again, possibly setting the course for the markets, at least in the coming weeks.


On the other hand, oil experienced a rise of almost 6% even though inventory figures grew well above forecasts. This movement, however, would not fit in with a forecast of an economic slowdown which, if it occurred, would mean a drop in global demand. There is talk that purchases for storage are taking place in anticipation of a worsening of the Ukraine conflict. In short, we can conclude that yesterday's session was somewhat abnormal because the usual correlations between assets, events, and the published data were not followed.

Normally, when the market behaves in a way that does not coincide with the fundamentals, it tends to adjust sooner or later. 

GráficoDescripción generada automáticamente


Sources: Bloomberg, Reuters

Share this article

This information prepared by is not an offer or a solicitation for the purpose of purchase or sale of any financial products referred to herein or to enter into any legal relations, nor an advice or a recommendation with respect to such financial products.This information is prepared for general circulation. It does not regard to the specific investment objectives, financial situation, or the particular needs of any recipient.You should independently evaluate each financial product and consider the suitability of such a financial product, by taking into account your specific investment objectives, financial situation, or particular needs, and by consulting an independent financial adviser as needed, before dealing in any financial products mentioned in this document.This information may not be published, circulated, reproduced, or distributed in whole or in part to any other person without the Company’s prior written consent.
Past performance is not always indicative of likely or future performance. Any views or opinions presented are solely those of the author and do not necessarily represent those of Financial Services (Pty) Ltd trading as CAPEX.COM/ZA acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via CAPEX.COM/ZA, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15.  Magnasale Trading Ltd is the principal to the CFD purchased by investors.