S&P 500 starts week up ahead of inflation figures


S&P 500 rises as investors try to front-run official figures.

The S&P 500 is clawing back its losses over the last week, as the market anticipates slower inflation figures and rate rises.

Ahead of a busy week in the US, markets have tried to front-run the news.

The S&P 500 added 1.43% closing just 10 points down from 4,000.

At the same time the Dow added 1.58% and the Nasdaq Composite rose 1.26%.

While markets are now pushing up, it is coming off a down week which saw the S&P 500 have its worst week since September.

Markets rise but watch for global data

Like it has been for most of 2022, investors will be on inflation watch.

Once again, they will be looking for signs that inflation is cooling and that the US Federal Reserve (the Fed) can pivot from its current rate-rising strategy.

As such, investors will be watching the US consumer price index (CPI), which is widely predicted to show prices are continuing to fall.

If tomorrow’s figures show a deceleration it will match the current narrative coming out of the Fed and let it justify slower rate rises.

A couple of weeks ago chair Jerome Powell said inflation was slowing, although he pointed out there are challenges ahead.

“Despite some promising developments, we have a long way to go in restoring price stability,” he said.

If the CPI figures are slowing, it means the widely predicted 50-basis-point rise from the Fed can occur. While this is still above traditional 25-basis-point rate rises, it is heading in the right direction after the central bank lifted rates 4 times by 75 basis points.

Bad investment sentiment is good for markets

As weird as it might sound, the poor investor sentiment means the market doesn’t need much to rally. Well at least according to eToro’s global market strategist Ben Laidler.

“If everyone is bearish, there are few left to sell, and many could buy – it means a little ‘less-bad’ news goes a long way,” he said.

The market strategist warns that sentiment still remains low.

“Sentiment is off its lows but still depressed and it’s only been this low a handful of times. The rebounded VIX captures attention but it’s the outlier, with other sentiment indicators remaining very low,” he said.

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