The SPX500 has moved for the 4,000 level, with all significant indices higher as traders expect a weak CPI print.
US inflation on Thursday can make or break the stock market, depending on the outcome.
SPX500 – Daily Chart
The SPX500 has resistance just above the 4,000 level, which can open a move to the 4,100 level. Support would be at 3,800 if the inflation data were to disappoint with a higher number.
Wednesday's CPI event risk "could be a decider where the S&P 500 can either break above its 200-day moving average, the 4,000 level and the downtrend line, or we head back to 3,800," Aurel BGC trader Gurmit Kapoor told Bloomberg.
Slowing in inflation over the last months, analysts expect to continue with a print of 5.7% expected for CPI, down from 6%. In the headline inflation figure, analysts see a big move to 6.5% from 7.1%. However, some are not so convinced and are worried about specific indicators.
Analysis from investment bank JP Morgan predicted an 85% of at least a 1.5% move higher in stocks with a print below 6.6%. They also saw a 15% chance of a 2.5-3% move lower in the number above 6.6%.
Nomura's Charlie McElligott said the CPI print "is a bigger deal than the market is already giving credit for." Options markets are heating up, and a big move could happen after the inflation print.
The data will be a big deal for investors as a soft number will imply that the Federal Reserve's rate hikes are working and that they will slow on further increases. US consumer inflation is expected to have fallen slightly in December due to a sharp drop in gasoline and energy prices, but the annual rate is likely to remain high.
"We welcome it with open arms. It's good news," said KPMG chief economist Diane Swonk. "It's great and it helped to fuel consumer spending in the fourth quarter... But it's still not enough."
The release will be the final CPI report before the Federal Reserve's February 1 interest rate decision and could lead to a big market move.