The most important reaction isn't from the analysts but from the U.S. dollar which is down 0.64 on the cash index, to 101.56.
From ZeroHedge:
It usually doesn't take long for Wall Street's "hot takes" to come flooding in after the CPI report, and today was no exception. Below we have collected some of the fastest reactions to the headline CPI miss, although as always, these mini narratives are entirely contingent on what prices end up doing, so if markets reverse their early gains, don't be surprised if the authors pull a 180 degree flipflop.
Knowledge Vital, Adam Crisafuli:
"The huge 100bp dip in the Y/Y pace of inflation is a big, positive development, and probably means the Fed is done hiking. However, the Y/Y pace of core inflation rose M/M for the first time since Sept 2022, and this is what the Fed cares most about (which means Powell and his colleagues will be stubborn in pushing back against any talk of rate cuts). While this CPI is bullish for stocks, we think the Q1 earnings season will matter much more for the S&P."
BMO Capital Markets, Ian Lyngen:
“Moderating inflation data in March brings into question whether Powell will ultimately need to keep rates at terminal throughout 2023 — however, it is far too soon in the data cycle to have any true insight on this topic based on CPI alone.”
Wells Fargo, Jay Bryson:
“Potentially, if we’re in a recession at the end of the year, I could see that, but if we have a soft landing in the economy, I can see the inflation rate getting stuck at 3% to 3 1/2%. What is does the fed do at that point? Does it throw in the towel? Do they say we can live with 3-3.5%? Or do they really mean it, we need to get back down to 2%? And if they need to get down to 2%, you’re not going to see rate cuts at the end of this year. I think you’re going to see rates remain, at a minimum, elevated at that point.”
Charles Schwab UK, Richard Flynn:
"The fall in the rate of inflation is being welcomed by investors, who may speculate that the Fed could soon pause its cycle of monetary tightening. That being said, whilst the rate of inflation has fallen, it remains far above the Fed’s 2% target. Officials have been laser-focused on fighting inflation and may decide that additional tightening is required to achieve its target when the FOMC meets later this month.”
CIBC Capital Markets, Karyne Charbonneau:
"The pace of core inflation maintains the case for a follow-up rate hike by the Fed in May, provided banking system issues look sufficiently stable."
Renaissance Macro, Neil Dutta:
“If I think about the economic outlook as four potential scenarios: (1) soft-landing, (2) recession, (3) continued overheating, (4) stagflation – the odds of stagflation went down while the odds of soft-landing went up. Good news for stocks.”
ING, James Knightley:
“The combination of higher borrowing costs and the tightening of lending conditions that will inevitably result from the fallout of the recent banking stresses heightens the risk of a hard economic landing. This will make it even more likely that inflation returns to the 2% target by early next year.”
....MUCH MORE
Commodities though seem strangely muted when one might expect decent upticks versus the dollar.The only upmoves greater than one percent are in oil and platinum.
