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Thursday, October 13, 2022

Today's newsletter is by Jared Blikre, a reporter focused on the markets on Yahoo Finance. Follow him on Twitter @SPYJared. Read this and more market news on the go with Yahoo Finance App.

Wall Street awaits this morning's consumer price index release for September with bated breath despite the overall song remaining the same.

Analysts are expecting the 8:30am ET data dump to show a slight moderation in the headline number (to 8.1% from 8.3%) while expecting a slight uptick in "core" inflation, which excludes food and energy (to 6.5% from 6.3%).

The average consumer doesn't need to be told the actual numbers since they will most likely continue to indicate a decades-high in the price of goods.

Details matter, however, for investors laser-focused on the data points that are most important to the Fed. As we've seen in 2022, small beats or misses on the headline numbers can move the entire stock market 3%, 4%, even 5%.

The potential for volatility is only heightened as the major indices (^DJI, ^IXIC, ^GSPC) are precariously perched at or near the lowest levels in two years. Throw in chaotic, illiquid bond and currency markets, and investors have their work cut out for them today.

Market participants are looking ahead toward the November 1 and 2 meetings of Federal Open Market Committee participants, where the Fed is expected to hike 75 basis points for the fourth consecutive time — with another 50 bps priced in for the December meeting.

Minutes from the Fed's prior September meeting, released Wednesday, substantiated expectations that the Fed would slow its blistering pace of rate hikes by year-end. Fed officials said that it "would be important to calibrate the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook.”

In other words, the Fed is going to hike until something breaks — but will try not to engineer too much long-term damage to the economy.

Any hopes for dovish undertones about the near-term were largely dashed, as the minutes revealed many Fed officials were more concerned with the cost of taking too little action to bring down inflation than too much action.

The Fed has consistently been saying quite plainly that the central bank is de facto engineering a recession with higher unemployment rates and a cooling economy to combat inflation. From the minutes: “Participants judged that a softening in the labor market would be needed to ease upward pressures on wages and prices."