Stock market pining for price inflation after CPI report

The stock market showed some rebound fight yesterday, but it ultimately suffered another technical knockout. It got back on its feet this morning ahead of the 8:30 a.m. ET release of the February Consumer Price Index (CPI).

It did so aided by the following influences:

• An expectation that the market is primed for a bounce given the speed and scope of recent losses (at its low yesterday, the S&P 500 briefly entered into “correction territory,” defined as a 10%+ pullback from the prior high it reached on February 19).
• Rebound action in the mega-cap stocks, which have been among the hardest hit stocks during the sell-off.
• The prospect of a Ukraine-Russia ceasefire agreement.
• The House passed a continuing resolution (217-213) that will fund the government through September 30; the bill now heads to the Senate where it will need to pass to avert a government shutdown after March 14.
• The MBA’s weekly Mortgage Applications Index increasing 11.2%, demonstrating how lower mortgage rates can stoke refinancing and purchase application interest.

Despite the sunny disposition in the equity futures market, the skies weren’t exactly all clear. 

• The 25% tariff rate on steel and aluminum imports goes into effect today.
• The European Commission announced countermeasures on up to EUR26 billion of exports to the U.S. in response to the steel and aluminum tariffs.
• Goldman Sachs cut its year-end price target for the S&P 500 to 6,200 from 6,500.

The February CPI brought some headline sunshine. Total CPI, tempered by a 0.1% decline in new vehicle prices, was up 0.2% month-over-month (Briefing.com consensus 0.3%) following a 0.5% increase in January. Core CPI, which excludes food and energy, was also up 0.2% month-over-month (Briefing.com consensus 0.3%) following a 0.4% increase in January.

On a year-over-year basis, total CPI was up 2.8%, versus 3.0% in January, and core CPI was up 3.1%, versus 3.2% in January.

The key takeaway from the report is that inflation overall is still sticking comfortably above the Fed’s 2.0% target, and now with tariff actions ramping up — and “reciprocal tariffs” coming April 2 — confidence has been shaken that future inflation reports will convey undeniably pleasing inflation data. 

The 2-yr note yield is up two basis points to 3.96% and the 10-yr note yield is up two basis points to 4.31%. On a related note, there is a $54 billion 10-yr note auction today with results announced at 1:00 p.m. ET, shortly before the release of the February Treasury Budget at 2:00 p.m. ET.

The equity futures market saw a knee-jerk spike on the CPI headlines. The Dow Jones Industrial Average futures were up more than 500 points. Things have settled back a bit, yet the early gains remain solid.

Currently, the S&P 500 futures are up 64 points and are trading 1.1% above fair value, the Nasdaq 100 futures are up 303 points and are trading 1.6% above fair value, and the Dow Jones Industrial Average futures are up 278 points and are trading 0.7% above fair value.

That leaves the major indices in-line for a higher start, but of course that means little for a market that is pining for a higher finish and a day of trading that is devoid of selling into strength.

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Originally Posted March 12, 2025 – Stock market pining for price inflation after CPI report