How stocks react to CPI data
The November Consumer Price Index report will be released on the morning of Tuesday December 11. As Yahoo Finance's Jared Blikre explains in the video above, the CPI report has played a big role in the rally so far this year.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Video Transcript
JARED BLIKRE: Stocks are mixed this Monday morning. But the market catalyst, well, they're really about to kick in tomorrow because we have CPI, Consumer Price Index data. And we're going to break down what this means for the market. Now, I have a chart here of the S&P 500 going all the way back-- and that's in purple, by the way-- going back to April of 2020. So you can see those pandemic lows there.
What I've done with the cyan blue line is these are the CPI days, so the gains or losses in the stock market as represented by the SPY, which tracks the S&P 500. You can see these gains as they fluctuate with the overall market. Now, when we had the great bull market and that was during the pandemic, we did see CPI days, they traded kind of flat.
And then last year, when we had all those interest rates increases and we had that bear market, we did see CPI days trade to the downside. But importantly, last October, in fact, the day we were coming off the low, that big that big kick to kick start this rally that we've had, that came with the CPI report.
And in fact, this big gain here was not only matched, but exceeded a month later with a bigger gain. And so arguably CPI has played a very important part in the rally this year. In fact, in the S&P 500 and SPY that tracks it, it accounts for about five percentage points of the gain, just those CPI days. So had you been in the market only on CPI days, you would be up 5% this year.
So that's pretty significant considering that we also have nonfarm payrolls that's on the employment front and also the Fed. We have a meeting this week. Among those three, we really have the biggest drivers of the market this year. And by far, CPI has been the biggest driver of those three.
Just want to go over real quick the sector action over the last month. We've seen a huge increase in real estate, consumer discretionary, that's retail. That ties into some of these prices that we're going to be getting tomorrow that consumers face. Industrials, financials, materials, utilities, basically a broad swath of sectors that were underperforming have suddenly perked up. And so that's kind of what we're facing going into the new year. Diane.
DIANE KING HALL: All right. That was a great breakdown as usual, Jared.
