US SP500 Estimated movement due to CPI release

US SP500 Estimated movement due to CPI release

Meme stocks rise but Indecisive trade into US PPI and Fed's Powell speech

Meme stocks (GME, AMC) surged on the return of "TheRoaringKitty" to social media platform X (ex. Twitter). At one point GME was up over 110% before retreating and closing 77% up, while hitting the market circuit breaker more than 5 times. It is estimated that in the abrupt move that caught many speculators off guard, that an estimated 1 Billion dollars worth of positions have been liquidated. Other MEME stocks followed suit like AMC rising 70%, and surprisingly Tesla rising around 5%, after news that Tesla rehired Tesla supercharger employees, that the CEO Elon Musk previously fired.

In the mean time Wall Street and world stock markets have crossed the first-quarter corporate earnings season comfortably enough to be back reaching for previous record highs, yet macro markets seemingly don't want to budge more until they see this week's upcoming U.S. inflation update. Below is a chart from LSEG showing the inflation expectations with the yellow line, and actual CPI readings with the green line.

With this Wednesday's U.S. consumer price report release, we will receive data on whether disinflation has resumed after a sticky Q1, and if it has resumed in the right direction enough to see if the Federal Reserve will indeed keep at easing expectations for the near future.

Consensus forecasts for the April release estimates monthly core CPI gains slowing to a 0.3% pace from 0.4% in March - dragging the annual rate down to 3.6% from 3.8%. The headline rate is expected to slip back to 3.4% from 3.5%. Below is a chart from JPMorgan showing the expected readings for this Months CPI print and the probable S&P reaction.

Notably, JPMorgan and Citigroup strategists suggest that if the core CPI exceeds expectations, there could be a selloff in risk assets, with the S&P 500 potentially falling between 1.75% to 2.5%.

The current low volatility environment has made stock market hedging more appealing not only to hedge funds, as an increase in volume in VIX call has been observed, in anticipation of potential market swings this week.

On the agenda today • Tuesday, May 14:

o Core PPI year over year for April, previously at 2.8%.
o Core PPI for April is forecasted at 0.2%, unchanged from the previous month.
o PPI year over year for April, previously at 2.1%.
o Producer Price Index for April is expected to be 0.3%, up from 0.2%.
o Fed Governor Lisa Cook speaks at 9:10 AM.
o Fed Chair Jerome Powell speaks at 10:00 AM.

DAX Technical Analysis

Chart:forex.com 2 H chart

Ranging between 18,850 and 18,540.
Narrow Bollinger band shows little volatility and volume ahead of PPI and CPI data.
18,540 is strong level of resistance as 100EMA is shortly below.
RSI is in bottom range of RSI showing weakness in trend.
Stoch RSI is sloping downwards but has not reached Oversold territory, indicating that the sideways move might not be complete and investors wait for further catalysts.

Earnings tomorrow:

Premarket: Allianz ADR, Merck ADR, EON SE, RWE AG PK, Commerzbank AG PK, Burberry Group Plc, Thyssenkrupp ADR,

Corporate news:

Apple Announces $110bn Buyback
TikTok Sues To Block The US Ban
The US overtook China as Germany's biggest trading partner in early 2024.
Tesla is eyeing Thailand as an alternative EV manufacturing hub to reduce reliance on China as the US threatens tariffs.