AFMC - Stocks Rally As Implied Volatility Drops Following Hot CPI Report
2024-03-12 14:12:38 ET
Summary
- CPI report shows higher-than-expected inflation, causing bonds and the dollar to rise and inflation expectations to increase.
- Core CPI and other inflation metrics have been steadily trending higher, suggesting a potential shift in monetary policy.
- The mechanical unwind of implied volatility following the CPI report leads to a temporary rally in stocks, but the long-term impact depends on the movement of rates and the dollar.
Swap markets did an excellent job of again predicting the CPI report, which came in hotter than expected. Headline inflation rose by 3.2% year-over-year vs. estimates of 3.1%, and headline inflation rose by 0.4% vs. forecasts of 0.4%. Core CPI rose by 0.4% vs. estimates of 0.3% and by 3.8% vs. 3.7%....
Stocks Rally As Implied Volatility Drops Following Hot CPI Report