Market Volatility Alert: Blockbuster Jobs Report Raises Stakes for Upcoming Inflation Data
The recent blockbuster jobs report has sent shockwaves through the market, and analysts at Bank of America are warning of potential volatility ahead of this week’s consumer price index (CPI) data. The September jobs report exceeded expectations, with 254,000 jobs added last month, putting pressure on this week’s inflation reading.
According to the analysts, a significant upside surprise in the CPI data could lead to market uncertainty and increased volatility. Options are already pricing in a 109 basis point move in the S&P 500 on Thursday, surpassing the three-month average of a 70 basis point move.
While a slight upside surprise tied to strong macro data may not be detrimental to stocks, a larger-than-expected increase in inflation could force the Federal Reserve to reassess its stance on interest rates. The central bank has been focused on the labor market, but a surprise in inflation data could shift its attention back to pricing pressures.
Economists predict the CPI report will show inflation continued to cool last month, rising 2.3% year-over-year. However, if the data surprises to the upside, the Fed may need to reconsider its rate-cutting plans. The odds of a 50 basis point rate cut next month have already slipped from 33% to zero following the release of the September jobs report.
Thursday’s CPI reading will be a crucial indicator of the Fed’s next move, and investors are bracing for potential market volatility. As one analyst noted, “Good news is good news for stocks as long as inflation doesn’t flare up again.”
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