CPI Report - Do equities go up with bad numbers?

Sorry for my ignorance, but I noticed today that the CPI number came out worse then expected according to FF (0.1 vs. 0.2). With other news reports I noticed that dow futures usually go down with a "bad" number. However, today equities shot up high.

Is this because investors think the fed. will cut rates again?

Does this mean a bad CPI report will ALWAYS create a rise in equities?

Are there any other reports that act in this manner and why?

Thanks for any help!

What you need to understand is that stocks react differently to economic indicators than forex does, by differently I am not saying oppositely to forex reactions simply differently. In stocks traders are looking for something and they react to the number based on that need. On that day they were worried that inflation increased much faster with the surge in food and oil prices, especially that food prices jumped the most since 18 years, this caused a fear that such causes would hurt consumer spending, when it turned out that the number is actually softer than expected they went on a bullish frenzy. We actually traded that number 10 min after the bell,because we knew everyone would like to react and adjust.

In addition, I am sure that the majority thinks that such a number was really really bad for the "USD" and that they should consider a selling spree on the "USD" because it came lower than expected, sure on the extreme short term (meaning the intraday play) the USD went weaker on the number,I mean it came unexpectedly lower from the consensus and the previous month, but looking at the bigger picture that number implied that inflation on a y/y basis still lays at 3.9% & core CPI y/y at 2.3% which is much higher from the Fed Reserve target,this implied to the majority that the Fed has reached the end of their rate cut cycle,especially that the Fed reserve hinted uncertainty regarding inflation, and it is highly believed that by 2009 the Fed will start increasing rates.


In brief ,no,equities will not always react the same way to the CPI,you always need to look as to what they are looking for,what they are concerned about ,and how the number reflects to those concerns.


Your welcome !

Hello,

I thought of updating this thread with the reaction of indices to the PPI number in case somebody was wondering why they reacted this way & how again the numbers provided an almost sure win trade even after the bell.

Indices are currently falling and this is mostly due to the Core PPI m/m number coming out twice higher than expected at 0.4% instead of 0.2%,the numbers got interpreted as follows: companies will need to raise prices to secure/protect profits regardless of the slowdown in the economy which will hurt consumers, if consumers can no longer afford to consume this will cause companies profits to fall, this is why the numbers had a negative reaction on indices, basically inflation is accelerating (of course this will push the Fed to focus on inflation). In addition, you have the Oil prices going higher which is also disliked by companies.

This is it,
have a nice day!