After Tuesday's Consumer Price Index Report, JPmorgan's Trading Desk Predicts A Wild Ride For The S&P 500

JPMorgan traders said Monday that the inflation report that is expected to be released on Tuesday could send the market tumbling.

‍

It is expected that the consumer price index will be released at 8:30 a.m. EST. A diverse basket of goods is used to measure inflation through the consumer price index. The Dow Jones Economic Survey expects the January reading to increase 6.2% from the previous year.

‍

The sales and trading desk at JPMorgan expects the S&P 500 to rise 10% by the end of the year if the consensus estimate is correct.

‍

As the rally sputtered in Tuesday's session, the stock market rose between 1.5% and 2%. According to the desk, CPI is likely to rise by 6% and 6.3% in January relative to a year ago, in line with the Dow Jones polled economists. There is a difference between JPMorgan's sales and trading desk and its research group.

‍

In response to varying readings, the desk has estimated the following movements, along with the likelihood they are accurate:

‍

The CPI would rise above 6.5% at a 5% probability, aligning with the resurgent inflation hypothesis - the S&P 500 would drop by 2.5% to 3%.

‍

Hawkish outcomes are less likely here than if this happened last year - S&P 500 down 1.5% - 25% probability - CPI between 6.4% and 6.5%.

‍

It is considered 65% likely that the CPI will be between 6.0% and 6.3%. Delivering a bullish outcome might significantly lower yields, as well as the USD, and boost risk assets.

‍

There is a 5% probability of CPI falling below 6% - "It would be good for S&P 500 to increase by 2% to 3%" - Expectations for Federal Reserve rate hikes to decrease to just one.

‍

According to Securities and Exchange Commission data, S&P 500 options are pricing in a 2% move following the CPI release. Throughout the past year, markets have responded to data in that way.

‍

There has been a history of bold predictions from the JPMorgan trading desk in the past, and at one point last year the market moved as a result. After the trading desk's scenarios showed the S&P 500 would move at least 2%, one of the more unlikely scenarios predicted a 10% swing. The Dow Jones Industrial Average index gained 500 points ahead of November's reading.

‍

Similar trading action is being seen in the market ahead of the latest print. There was an increase of about 300 points in the Dow on Monday. In the past week, the Nasdaq Composite and the S&P 500 have gained over 1% each.

‍

December was the month with the largest dip since 2020, declining by 0.1% month-over-month. An interest rate hike by the Federal Reserve was paused or pivoted by investors looking for signs that inflation had stabilized.