Market Summary 12th Jan 2024

The markets experienced quite a rollercoaster after the latest Consumer Price Index (CPI) data came in higher than expected. Initially, this didn't seem like good news, and while the markets did recover somewhat, the majority of stocks still ended up lower. Surprisingly, almost 70% of Nasdaq stocks closed down even though the QQQ, an index that tracks some of the largest tech companies, finished positively. So, what caused this turnaround despite the high CPI numbers? It turns out that certain parts of the CPI have more impact than others. For instance, some of the biggest increases in the core inflation rate were in Medical Care Services and Used Cars and Trucks. However, other more up-to-date indicators suggest a more positive outlook.

Here's a useful snippet from Newsquak: "In the CPI report, the main price jumps in core inflation were driven by a 0.7% increase in Medical Care Services and a 0.5% rise in both Used Cars and Trucks and Shelter. Analysts at Pantheon Macroeconomics point out that Zillow’s data on rent suggests a slowdown in the rise of CPI rents this year. They also note that auction trends for Used Vehicles indicate further declines in the CPI measure for these items in the coming months."

Financial institutions often use alternative data sources to predict future trends. The market’s response to the CPI data suggests optimism that things are moving in the right direction.

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