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“Mr. Gorbachev, open this gate. Mr. Gorbachev, tear down this wall.” – Ronald Reagan, 6/12/1987

Morning stock market summary

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Today is the biggest day of the week for data, and the “first act” just hit the stage as CPI came in weaker than expected. At the headline level, CPI was unchanged while Core CPI increased 0.2% versus forecasts for a gain of 0.3%. Year/year Core CPI came in at 3.4%, the lowest level since April 2021. Futures have surged in reaction. It’s hard to believe that a week ago this morning, the market was all worried about stagflation with weaker economic data (Chicago PMI and ISM Manufacturing) and stubborn inflation.  After last Wednesday’s ISM Services report, a strong headline employment report, and today’s CPI report, stagflation has been pushed off the stage as Goldilocks cries, “Make room for me!”

It’s not a Presidential election, but for the first time in four years, the Federal Reserve will announce an interest rate decision on the same day as a monthly CPI report. Since 1998, there have only been 17 other days where both events happened on the same day, and in the chart below, we show the S&P 500’s performance each time.  Overall, returns have been positive with a median gain of 0.56% and gains just over three-quarters of the time. The best day for the S&P 500 on these days was in December 2008 when the S&P 500 rallied 5.14% while the worst performance was the most recent occurrence on 6/10/20 when the S&P 500 declined 0.53%. Ironically, the best day came in the middle of one of the deepest bear markets in a generation while the worst day was in the early stages of the post-Covid surge.

The table below shows the performance of the S&P 500 and all eleven sectors on each of the 17 prior days. We also show the Fed’s interest rate decision for each meeting.  Of the 17 occurrences shown, the Fed cut rates twice, raised rates four times, and kept rates on hold eleven times.  On the eleven days when the Fed left rates on hold, the S&P 500’s median gain was also 0.56% with gains just over 80% of the time. The two best-performing sectors on these days were Technology (1.10%) and Materials (1.01%) with gains of 91% and 82% of the time, respectively.

To continue reading the rest of today’s morning note, where you’ll find much more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.

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