{"id":439835,"date":"2026-10-12T14:00:20","date_gmt":"2026-10-12T07:00:20","guid":{"rendered":"https:\/\/www.swingfish.trade\/blog\/market-news\/market-playbook-what-if-us-cpi-comes-in-hot-but-stocks-refuse-to-fall-439835\/"},"modified":"2026-10-12T14:00:20","modified_gmt":"2026-10-12T07:00:20","slug":"market-playbook-what-if-us-cpi-comes-in-hot-but-stocks-refuse-to-fall","status":"publish","type":"post","link":"https:\/\/www.swingfish.trade\/blog\/market-news\/market-playbook-what-if-us-cpi-comes-in-hot-but-stocks-refuse-to-fall-439835\/","title":{"rendered":"Market playbook: What if US CPI comes in hot but stocks refuse to fall?"},"content":{"rendered":"
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The main focus in markets this week will be on the US CPI report due Wednesday, 14 October. The inflation numbers for September will be heavily scrutinised as traders and investors are very much still caught in trying to weigh the inflation outlook as well as risks of the Fed raising interest rates further. And all of that is made even more crucial as Treasury yields are threatening multi-decade highs in the past week or so.<\/p>\n

The usual expectation is that a hotter-than-expected inflation report will be bad news for stocks. But what if we actually get that but Wall Street refuses to play ball and stocks do not happen to fall? That is a rather interesting scenario, no?<\/p>\n

To start, let’s just consider what the typical market reaction should be. Higher inflation would mean that the Fed might have to keep interest rates “higher for longer”<\/a> or even raise them further to deal with stronger price pressures in general.<\/p>\n

As things stand, Fed funds futures<\/a> are currently pricing in roughly an 81% probability that the Fed will keep interest rates unchanged later this month. As such, a hotter-than-expected inflation report could challenge that pricing expectations and see traders push for bets on another rate hike.\u00a0If not, it could at least reinforce expectations of another move in December.<\/p>\n

In turn, that rightfully should translate to\u00a0higher Treasury yields and a stronger dollar. And for stocks, that’s usually not a good combination to deal with. Higher yields make borrowing more expensive for companies while also making bonds more attractive relative to equities. In turn, that could put downward pressure on stock valuations, particularly among big tech.<\/p>\n

However, what happens if the market reaction isn’t what we expect it to be and stocks don’t move according to how they should?<\/a> How should we approach that as a trader?<\/p>\n

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Well, the first is to understand what might be causing such a market reaction. Perhaps it is a case that\u00a0traders had already positioned themselves for a hot inflation reading, meaning much of the bad news was priced in beforehand. Or it could be a case of the devil being in the details, with the\u00a0headline number looking\u00a0ugly but the underlying inflation details aren’t quite as worrying.<\/p>\n

Having said that,\u00a0I’d still be wary of immediately treating that resilience as a bullish signal. The thing I want to see is whether\u00a0stocks can build on the initial reaction, especially if Treasury yields continue climbing.\u00a0Sure, stocks might hold firmer in the first 15 to 30 minutes after the data. But if yields keep pushing higher and equities start losing ground a couple of hours later, then perhaps that initial resilience wasn’t quite as convincing as it first appeared.<\/p>\n

Besides that, it will also be worth watching\u00a0whether the buying in the stock market is more broad-based or merely supported by a handful of big tech names. That will provide some idea of what is actually carrying the market mood in equities should there be contradicting signals from the likes of bonds and the dollar.<\/p>\n

So, don’t just focus and trade on the headline numbers from the US CPI report. It would be wise to also pay attention to\u00a0how markets react in the hours that follow as\u00a0the absence of a selloff can arguably tell us more than the inflation numbers themselves.<\/p>\n

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This article was written by Justin Low at investinglive.com.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"

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