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The Tell: Stock market’s post-CPI slide in keeping with recent history


Stocks fell sharply Friday after another hotter-than-expected consumer-price index reading trashed expectations for peak inflation, putting the S&P 500 on track to continue a recent string of losses on days that feature inflation readings.

“While median returns for the S&P 500 have been right around the flatline over the last two years on CPI days, more recent returns have been much weaker,” wrote analysts at Bespoke Investment Group, in a Thursday note. Since Federal Reserve Chair Jerome Powell stopped using the term “transitory” in late November to describe inflation, the S&P 500 has declined on the day of the CPI report four out of six times, including the past four reports.

Over the past six months, the S&P 500’s median performance on CPI days has been a decline of 0.18%, the analysts said.

Major indexes fell sharply Thursday in a late session selloff. Stocks were hammered again Friday, with the S&P 500

down 2.4% after the May consumer price index showed a monthly rise of 1%, well above the 0.7% rise forecast by economists surveyed by The Wall Street Journal. The year-over-year rate rose 8.6%, topping the 40-year high of 8.5% seen in March.

See: Consumer prices surge again, CPI shows, and push U.S. inflation rate to 8.6%

The Dow Jones Industrial Average

was down 650 points, or 2%, after falling more than 800 points at its session low.

The Bespoke analysts looked at sector performance over the past six reports and found that energy, unsurprisingly, has been the best performer on CPI days, with a median gain of 1.1%, while technology was the worst. Of course, 2022’s stock-market fall has been led by tech-related stocks, while energy has soared in response to surging oil prices.

Bespoke Investment Group

Bespoke noted that for a market concerned about inflation, recent reports haven’t offered investors much comfort. Over the past 24 months, there were just three months where headline CPI came in weaker than expected (6/10/20, 11/12/20, and 9/14/21), they said.

“Ironically enough, on each of those three days, the S&P 500 actually traded lower, although to be fair, all three of these reports were before Powell ditched the term ‘transitory,’” the analysts wrote.

Economic Report: Inflated grocery prices and shrinking package sizes. The cost of food is rising at fastest pace since 1979

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