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Analysts at BofA say the blockbuster jobs report raises expectations for future inflation data.
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The analyst predicted that an upward surprise in the September CPI would trigger fresh volatility.
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Friday’s September jobs report was weaker than expected, with 254,000 jobs added last month.
Analysts at Bank of America say September’s jobs report was good news but gave investors further reason to brace for the next round of inflation prospects.
Analysts say last week’s blockbuster jobs report is adding to pressure on this week’s consumer price index data, raising the possibility that a big surprise on the upside could trigger a wave of market volatility. There is. They say the CPI statistics released on Thursday are “no longer a ‘non-event'”.
“We believe the importance of the CPI has increased this week following last Friday’s explosive employment report,” analysts said in a note on Sunday. “Significant surprises could create uncertainty in the easing cycle and increase market volatility.”
They note that options on the S&P 500 index are priced in for a 109 basis point (just over 1%) increase on Thursday, when the CPI is released, compared to last week’s forecast for a 91 basis point increase. This exceeds the three-month average change of 70 basis points on the day of the CPI release, and is the largest change of that size since May due to a CPI release.
On the bright side, analysts say the stock should be able to withstand some upside surprises if it tracks with strong macro data.
Analysts say, “Good news is good news for stocks, unless inflation flares up again.”Historically, when inflation declines, stock prices and interest rates rise, and when inflation continues on an upward trajectory, stock prices and interest rates fall. added.
Economists expect the CPI report to show that inflation will continue to slow last month, rising 2.3% year-on-year (up from 2.5% in August).
After years of battling inflation, the central bank is increasingly focusing on the labor market as inflation slowly recovers toward the Fed’s 2% target. that pivot This was behind the central bank’s decision last month to slash interest rates by 50 basis points, the first rate cut in four years.
But after the blockbuster September jobs report, some economists say: Inflation remains a concern. An unexpected upside in this week’s CPI data could force the Fed to turn its attention back to upward price pressures in the economy.
“September’s CPI will be a key data release. A strong labor report coupled with faster-than-expected inflation could lead to the Fed skipping its November meeting,” UBS economist Brian Rose said in a Friday note. There will be an increase in sexuality,” he said.
Probability that the Fed will cut interest rates by 50 basis points next month I slipped According to , after the September employment report was released, it went from 33% to zero. CME FedWatch Tools. Therefore, Thursday’s CPI reading will be a key indicator for investors in anticipating the Fed’s next actions.
of September employment statistics Non-agricultural employment increased by 254,000 compared to the expected 150,000, significantly exceeding expectations. The unemployment rate fell from 4.2% to 4.1%.
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