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US Stock Market Gains Ahead of CPI Release and Fed’s Rate Decision

Miguel A. Rodriguez
Miguel A. Rodriguez
12 December 2023

In the run-up to the release of the US Consumer Price Index (CPI) today and the Federal Reserve’s (Fed) rate decision tomorrow, the week started with a strong US stock market. Read on to see how these upcoming economic events could affect markets.  

US Stocks Gained on Investor Optimism  

US stocks rose Monday on optimism from investors preparing for the Fed's final two-day policy meeting of 2023.

The Nasdaq rose nearly 1% and is approaching the historical highs it last reached two years ago.

 

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TECH100 daily chart, December 12, 2023. Source: CAPEX.com WebTrader.  

US CPI Release Today, Fed’s Rate Decision Expected Tomorrow

Today, Wall Street will have an idea about whether the disinflationary trend continues, with the release of the US CPI for November.

The report will be released a day before the Fed's last scheduled decision for 2023. Officials are expected to hold rates steady and announce their Summary Economic Projections. The question is whether the Fed will try to moderate expectations of monetary policy easing after the market has bet on interest rate cuts by the end of Q1 2024.

The CPI figure could influence the comments that President Jerome Powell makes at the end of the Fed meeting tomorrow. This is more likely if the release confirms the downward trend in prices.

Robust Labour Data Boosts Confidence That a Recession Has Been Avoided

Labour market data released on Friday fuelled hopes that the Fed can achieve a so-called "soft landing" for the US economy. Investors’ fear is fading surrounding the Fed’s aggressive monetary policy tightening leading to a potential North American economy recession. This outlook is due to economic data showing the economy’s extraordinary resilience and its constant robust state.

Employment figures showed that Nonfarm Payroll rose more than expected in November, average hourly earnings increased monthly, and the unemployment rate decreased. While the numbers pointed to a tight labour market that could boost wages and inflation, they were widely seen as a sign that a recession has been avoided.

Upcoming Data Could Give Markets Even More Momentum

In this more favourable-than-expected scenario, the performance of the stock market continues to be positive. The CPI figure today, the expectations of a stable interest rate, the Fed’s report, and Powell’s comments tomorrow, could give markets even more momentum.

Key Takeaways

  • The Nasdaq rose nearly 1% yesterday.
  • The US CPI for November will be released today.
  • The Fed is expected to announce stable interest rates tomorrow.
  • The CPI figure could influence Jerome Powell’s speech after the rate announcement. 
  • US labour market data shows a robust economy which could have avoided a recession.
  • Powell’s comments tomorrow could help to provide markets with even more momentum.  

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Sources: Bloomberg, Reuters 

 

 

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Miguel A. Rodriguez
Miguel A. Rodriguez
financial_writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.