CPI print provided a much-needed cooling effect after the recent labor market "gravity-defying" blowout. For those of us tracking every tick, the story isn't just the "beat"—it's the divergence.
The Macro Rundown: Headline vs. Core
Inflation is definitely easing, but it's not a straight line down. Here’s the scorecard:
Headline CPI (YoY): 2.4% (Beat: Expected 2.5%, Previous 2.7%).
Headline CPI (MoM): 0.2% (Beat: Expected 0.3%).
Core CPI (YoY): 2.5% (In-line: Sticky as expected).
The Bottom Line: We’ve hit the lowest headline print in nearly 5 years. However, "SuperCore" remains stubborn, and with grocery and airline prices still climbing, the "inflation is dead" party might be premature.
Market Reaction: The "Everything Rally" (Mostly)
Traders are frantically repricing the curve. Since the data was delayed by the partial shutdown, the volatility was extra spicy:
Bonds: The 10Y Yield plunged to 3-month lows (~4.06%), and the 2Y Yield dropped 4bps instantly. Markets are now pricing in a 90% chance of a May cut.
Forex: The DXY (Dollar Index) saw its gains capped. The "higher-for-longer" trade is losing its luster today.
Crypto & Gold: Both "danced higher" following the report. Bitcoin is finding support as financial conditions ease.
Equities: A "nasty dynamic" continues for tech. Despite the cool CPI, AI-related stocks are dragging the Dow and S&P down due to sentiment around "creative destruction" and valuation resets.
The Analyst's Playbook: What’s Next?
We are in a "Sweet Spot" economy, but it’s a fragile one.
Watch the Revisions: With 2025 job growth recently slashed, the Fed may finally feel the "dual mandate" pressure to ease.
Fed Speak: Look for hawkish committee members to point to 6.5% airline fare spikes as a reason to keep their guard up.
The Pivot: If Retail Sales (coming up) show weakness alongside this cooler CPI, the March cut might move from "delusional" to "defensible."
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