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The Data That Cannot Be Missed

The Data That Cannot Be Missed

The stock market in the United States is bereft of focus, and market participants are unclear about the path it will take in the future. Recently, the United States stock market has been retreating from its recent highs. Investors seemed more cautious to support risky assets after the United States published its nonfarm payroll numbers (NFP) and today’s CPI number could really make or break the current trend for the US stock market. 

Learnings From US NFP Data 

The nonfarm payroll data in the United States came in far higher than anticipated, causing market players to speculate that the Federal Reserve may actually sustain its existing pace of interest rate hikrises given the healthy status of the employment market.

According to the numbers that were given by the Department of Labor on Friday, the number of people working in settings that are not farms climbed by 263,000 over the course of the month. However, throughout the course of the month, the unemployment rate did not change from its previous level of 3.7%. According to various estimates, it was predicted that the number of people with jobs would rise by 200,000, while the unemployment rate would remain stable at 3.7%.

The number for the preceding month was revised higher to reflect an increase. As a result, the increase throughout the course of the month was a few hundred points lower than it had been in the prior month. Taking into account people who have stopped looking for work and people who are working part-time jobs due to economic considerations, a more comprehensive measure of unemployment revealed that the jobless rate had inched down to 6.7%. This was due to the fact that people had stopped looking for work and people were working part-time jobs because of economic considerations. People who had stopped seeking for employment altogether were taken into consideration by this metric as well.

The Strong ISM Data 

The publication of the data from the US ISM Services PMI, indicated a considerable rise and a score of 56.5. Traders were even more cautious than they already were. Simply stated, the data on the economy of the United States delivers one clear message: the economy of the United States is likely to have a mild recession, if any at all, and the Federal Reserve has nothing to be concerned about.

Considerable Risk 

Nevertheless, the United States is still exposed to considerable risk from the possibility of higher interest rates or a very hawkish monetary policy. If the Federal Reserve does not slow the pace at which it is raising interest rates, it will surely put the brakes on the expansion of the U.S. economy.

The Most Important Single Economic Number 

The crux of the matter is that the future path of the stock market in the United States is closely linked to a single economic indicator, namely the US CPI data, which will be issued today. The report is anticipated to be made public at 1:30 Pm GMT, and it is anticipated that the estimate of inflation will decrease even more. The previous month’s result of 8.2% was reduced to 7.7% in the most recent month’s report.

The scenarios 

If the consumer price index in the United States drops to 7.1% or below, the Federal Reserve will have little need to be worried about inflation. This is due to the fact that the current trajectory of inflation is heading in the right direction, and there is sufficient headwind to pull the number further down in the coming months. On the other hand, the Federal Reserve might decide to keep its monetary policy stance the same even if there is just a marginal fall, which is defined as any amount that is more than 7.4%.

Summary 

To summarise, the Consumer Price Index for the United States is currently an essential indicator. Assume that the US CPI number maintains a decreasing trend that is consistent and fair. In such a scenario, it is quite unlikely that the Fed would quickly increase interest rates since doing so would impair economic growth for no good reason. The outcome of this scenario would be favourable for the stock market in the United States, and it is possible that the Santa rally is already in full gear.

If the figure is lower than expected, the Federal Reserve may decide to hike interest rates by an additional 75 basis points, which could result in a more severe decline in the value of the stock market in the United States.