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Changing Dynamics in the Stock Market


The impact of the Consumer Price Index (CPI) on the U.S. stock market has shifted dramatically since 2022. While monthly CPI readings previously triggered significant fluctuations in the S&P 500 and other major indexes, investors have grown less responsive to this data as CPI has steadily declined.

Based on data compiled by Dow Jones Market Data, the average percentage move (either up or down) of the S&P 500 on CPI release days in 2022 was 1.9%. The median move stood at a 1.7% change.

The most notable move occurred on November 10, 2022, when the S&P 500 jumped 5.4% following the release of the October CPI reading. Both the headline figure and the core rate, which excludes food and energy costs, rose less than expected.

Conversely, the largest daily decline took place on September 13 after the release of the August CPI report. The core rate exhibited an unexpectedly sharp rise, resulting in a 4.3% drop.

In contrast, the S&P 500 has displayed much milder reactions to CPI releases in 2023. While five out of the twelve CPI reports in 2022 caused movements of over 1% in the index, only one such significant move has occurred this year. On March 12, despite a February reading that provided little indication of easing inflation pressures, the index rose by nearly 1.5%.

According to Dow Jones Market Data, the average move (either up or down) on a CPI release day in 2023 has been 0.62%, with a median move of 0.45%.

As investors await the release of the July CPI report on Thursday, stocks remained relatively stagnant on Wednesday. The S&P 500 experienced a slight decline of 0.1%, while the Dow Jones Industrial Average traded near unchanged.

Economists surveyed by The Wall Street Journal anticipate a year-over-year rise of 3.3% in July’s CPI data, an increase from the 3% reading in June. However, the core CPI rate, which excludes volatile food and energy prices, is projected to slow to 4.7% from 4.8%.

Related: July CPI to align with expectations as the U.S. approaches the final leg of its journey towards lower inflation, according to traders.

—Michael DeStefano contributed.

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