CPI Weighs on Stocks

US stocks are ending the week on a softer footing following the latest inflation data released yesterday.  Annualised CPI was seen to have risen 3.2% last month, up 3% from a month prior. The stickiness in inflation will no doubt be a frustrating development for those looking to call an end to the Fed’s tightening program. Hawkish comments from Fed’s Bowman earlier in the week highlight the residual hawkish risks the market still faces and, with CPI lifting slightly last month, a further rate hike this year cannot yet be ruled out. Given the months of inflationary decline we saw prior to this latest reading, however, it would likely take a further month of rising inflation to drive up near-term Fed tightening expectations meaningfully.

Weak China Data

Softer data out of China this week has also weighed on stock market sentiment. With the post-pandemic recovery showing further signs of weakening there, traders are fearful of a broader slow-down developing. Chinese authorities are yet to announce the large-scale fiscal stimulus package traders had been anticipating and until such action is taken, risk sentiment is likely to remain weakened.

Technical Views

Nasdaq

The correction lower in the Nasdaq has seen the market breaking back below the 15177.5 level with momentum studies turned bearish now. While still within the overall bull trend, there is room for a deeper correction below this level with 14288.2 and the bull channel lows the next support area to note.