- Wall Street traders bet that further inflationary pressures would strengthen the case for a Fed rate cut, fueling a rally in both stocks and bonds.
- Investors focused on the upcoming consumer price index rather than the drumbeat of hawkish Fedspeak, a potentially miserable stretch of earnings, and the spectre of a recession. It should come as no surprise that technology, one of the most battered sectors during the Fed's tightening campaign, led gains on Wednesday. That increase was also reflected in the drop in US yields.
- To summarise, Thursday's CPI will be scrutinised from top to bottom, with a particular focus on core inflation, which excludes food and energy and is thought to be a better indicator than the headline figure. While a 5.7% increase is well above the Fed's target, helping to explain the Fed's intention to keep rates higher for longer, year-over-year price growth would also be moderate.
