CPI Data Fuels Soaring Stock Market Rally


Joseph Rangel

Nov 10th 2022  .  3 min read

CPI Data Fuels Soaring Stock Market Rally

The opening bell of the stock market let loose a fierce rally fueled by the U.S. Consumer Price Index (CPI) report and jobless claims that shook the entire market.

CPI inflation data increases were less than expected, and jobless claims came in at 225,000 – negative as it was 5,000 more than the median forecast. This negative information was first released, but it would quickly be forgotten. CPI stole the show when data revealed a 7.7% 12-month change versus the expected 7.9%. 

Our previous Simpler News article, “Market Chops and Drops into CPI,” gave the reading on the numbers by noting, “Any number lower than the estimated 7.9% may potentially move the market higher.” 

It would be an understatement to say that this report sent the market higher across the board.

Today was one of the most significant gains for the S&P 500, dating back to Covid-19 lows. Price action rocketed higher quickly, and some of the levels taken out are notable. There can be value found in how the price moves during a fast-moving day like today.

Bell rings with markets already soaring

At the open, the market was already trading considerably higher than before the CPI report came out. The opening bell sounded on the S&P 500 futures, and the price was below the psychological level of 3,900. The initial drive saw some profit-taking at this critical level and set up potentially the last bear trap before erupting.

Market clears 3,900 and fires higher

Once the market gathered its feet after some profit-taking, the S&P 500 futures could get above 3,900 and hold the massive level with ease on a retest. In doing so, the market proved that this move was more than just an knee-jerk reaction. 

After retesting and holding this fundamental level, continuation was expected as long as the market was holding above 3,900. 

As the market continued to push higher and above all of the key moving averages, this encouraged sentiment among market participants that momenum may be shifting, at least in the short term. 

Data gives market hope

The market had a similar rally recently on the expectation that the Federal Open Market Committee (FOMC) would announce a reduction in benchmark interest rate hikes. This rally ended when Federal Reserve (Fed) Chairman Jerome Powell announced plans to stay on track with higher rates. This latest CPI data may sway the Fed’s plans, and today’s rally may come from trader anticipation of a Fed pivot.

It will be essential to monitor upcoming economic data ahead of the next FOMC meeting in December to see if other data support a rate hike decrease. 

More economic data tomorrow 

The next economic report that will provide some hints on market sentiment comes tomorrow at 10 a.m. Eastern when the University of Michigan Consumer Sentiment Index is released. 

The stock market erupts on CPI

The Nasdaq and the S&P 500 were heavily positive to close the session. The S&P 500 closed up 5.5%, adding 206 points, while the Nasdaq closed up 7.29%, a gain of 754 points. The Dow followed, closing up 3.61%, rallying 1,173 points.