The First Slice for Tuesday, March 12, 2024

As the week unfolds, U.S. stock markets are exhibiting a mixed response, with investors on the edge of their seats awaiting crucial inflation data. This data, particularly the consumer-price index (CPI) released on Tuesday, could significantly influence the Federal Reserve’s decisions on interest rate cuts.

The Dow Jones Industrial Average gained 46.97 points, or 0.1%.
The S&P 500 fell 5.75 points, or 0.1%.
The Nasdaq Composite declined 65.84 points or 0.4%.

Alex McGrath, Chief Investment Officer for NorthEnd Private Wealth, describes the current state of the equity market as “eerily quiet.” The anticipation is high, as the upcoming CPI data will likely set the tone for market movements for the rest of the week. Investors are hoping for a “cool number,” indicating a slower pace of inflation, which would signal the possibility of the Fed moving towards rate deceleration. However, McGrath points out that a significant drop in inflation seems unlikely with the rise in energy and commodity prices.

Despite a slight loss of momentum last week, the S&P 500 has seen a remarkable 25% rally from its October lows, marking one of its most muscular 19-week gains in the past 20 years, according to Chris Larkin, Managing Director for Trading and Investing at E-Trade from Morgan Stanley. The market’s reaction to last week’s mixed jobs report was uncertain. Still, the upcoming inflation data is expected to determine whether the market rebounds or faces consecutive down weeks for the first time since October.

Fed funds futures traders have already factored in a quarter-point rate cut by the Federal Reserve by June, with expectations of at least four cuts by the end of 2024. These expectations were bolstered by the February jobs report, which showed robust payroll growth but an increase in the unemployment rate and modest wage growth. However, Thierry Wizman, a global foreign exchange and rates strategist at Macquarie, notes that these rate-cut predictions could change if inflation rises again, making the upcoming U.S. CPI report a critical piece of data………..[read more]