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Market Extra: CPI days have been among the most volatile for stocks this year. Here’s what to expect ahead of Tuesday’s report


Many investors are hoping that beaten down U.S. stocks will finish 2022 with a “Santa Claus rally” after the S&P 500 logged back-to-back monthly gains for the first time in more than a year in October and November, according to FactSet data.

But first, they need to make it through a week rife with potentially confidence-shaking events. Chief among them: the release of the November consumer-price index data Tuesday morning at 8:30 a.m. Eastern.

The CPI data aren’t the only potentially market-moving event this week — far from it: On Wednesday afternoon, the Federal Reserve is expected to hike its benchmark policy rate by 50 basis points. After the decision on interest rates is released, Chairman Jerome Powell will elaborate on the Fed’s views in statement and take questions from reporters, which could impact markets.

The Fed will also release updated economic projections, including its “dot plot” of forecasts for changes in the Fed funds rate.

See: 5 things to watch when the Fed makes its interest-rate decision

Beyond the Fed, there’s a smattering of other central-bank meetings set for this week, including the European Central Bank and Swiss National Bank. More rate hike are expected there, too.

With expectations for a 50 basis point move from the Fed already baked into markets, market strategists see the CPI report as the wild card — unless the Fed breaks with precedent and hikes interest rates by more (or less) than the 50 basis points that Powell hinted at during a speech at the Brookings Institution just before the start of the Fed’s premeeting blackout period.

Inflation is market’s chief concern

Inflation has become the market’s chief concern this year, and as a result, the monthly CPI reports have superseded other popular economic data series, like the monthly Labor Department jobs data, as the most consequential data for markets.

Market moves on CPI days have been particularly exaggerated this year. Already, the S&P 500 has recorded both its biggest daily gain, and its biggest daily loss, for the year so far, on the day that monthly CPI data were released.

When the October CPI data was released on Nov. 10, the S&P 500 rallied more than 5.5%, its largest single-day rally so far this year, according to FactSet data.

Conversely, when monthly August consumer-price inflation came in hotter than expected on Sept. 13, the S&P 500 plummeted 4.3%, its biggest daily drop so far this year.

See: Stock market’s post-CPI slide in keeping with recent history

Overall, CPI reports have tended to push stocks lower, as investors reacted to the reality that price pressures have accelerated at the fastest pace in more than four decades. The S&P 500 has finished lower on seven of the 11 CPI release days since the start of the year, as FactSet data cited below show.


SPX move (points)

SPX move (percentage)

1/12/22 (December ’21)



2/10/22 (January ’22)



3/10/22 (February ’22)



4/12/22 (March ’22)



5/11/22 (April ’22)



6/10/22 (May ’22)



7/13/22 (June ’22)



8/10/22 (July ’22)



9/13/22 (August ’22)



10/13/22 (September ’22)



11/10/22 (October ’22)



Intraday volatility in response to CPI data has become particularly severe in recent months. When the September numbers were released on Oct. 13, stocks staged a massive intraday swing, with the Dow Jones Industrial Average surging nearly 1,500 points from peak to trough, one of the biggest intraday swings for the blue-chip average in recent memory, according to Dow Jones Market Data.

Investors have reason to be worried

Investors have reason to be anxious heading into Tuesday’s report. Late last week, stocks sold off after Friday’s producer-price index showed that wholesale price growth had slowed by less than expected in November. This challenged expectations that cooling inflation might allow the Fed to cut interest rates again perhaps as soon as the latter half of next year, market strategists said.

“Wall Street ended Friday’s session in the red as the smaller-than-expected slowdown in producer prices revived concerns of stickier inflation, and thereby higher borrowing costs for longer,” said Charalampos Pissouros, senior investment analyst at XM, in a note to clients and reporters.

“Market participants may continue to reduce their risk exposure in case consumer prices confirm the picture painted by the PPI indices,” Pissouros added.

According to median estimates compiled by The Wall Street Journal, economists expect the headline CPI index to show an increase of 7.3% over the 12 months through November. That’s lower than the 7.8% recorded during the prior month.

On a month-over-month basis, economists expect an increase of 0.2% in November, compared with an increase of 0.4% in October.

While U.S. stocks traded higher on Monday, an unusual thing happened: the CBOE Volatility Index, also known as Wall Street’s “fear gauge,” actually rose. The VIX

is based on moves in options tied to the S&P 500, and it typically falls when stocks are rising to reflect that markets anticipate less volatility in the coming weeks.

A higher VIX could mean that options traders are bracing for more volatility to break out in the coming weeks — a period of the year that typically sees subdued trading volumes as liquidity thins during the holiday season, markets strategists said.

In recent trade, the S&P 500

was up 18 points, or 0.5%, while the Dow Jones Industrial Average

traded 274 points, or 0.8% higher; the Nasdaq Composite

was up 31 points, or 0.3%.

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