US stocks advance ahead of CPI data

US stocks rose at the start of a key week for monetary policy decisions by the Federal Reserve, the European Central Bank and a host of their peers.

The S&P 500 and the Nasdaq 100 they rallied after fluctuating earlier in the session. Treasuries advanced, with the 10-year yield around 3.54%. The dollar changed little.

Investors are looking for firmer clues about how far and how quickly central banks will tighten monetary policy from now on as recession fears resurface. While the Fed is expected to cut its wave of hikes to half a point on Wednesday, officials have said borrowing costs will need to remain tight for some time. US consumer inflation data on Tuesday will shed more light on whether that is the case or whether markets can expect rate cuts in late 2023.

“It is obviously a significant week from a macroeconomic perspective and while we are tempted to suggest that the FOMC events will be the highlight, ultimately the core inflation numbers will set the tone for US rate trading. for the rest of 2022″Ben Jeffery and Ian Lyngen of BMO Capital Markets wrote in a note.

The S&P 500 posted its best day since the CPI in November after inflation was slower than projected. The benchmark US equity index could rise as much as 5.5% on Tuesday, matching the best day of the year. CPI of history, if headline inflation comes in 0.2 percentage points below estimates year-over-year, according to market maker analysis. Optical.

Still, disparities in economic prospects between world regions, since the resurgence of covid in china to energy volatility in Europe, have kept risk sentiment at bay.

After the fed, the ECB will announce its rate decision on Thursday and may also opt for a 50 basis point hike. The markets also have to deal with the decisions of the Bank of England and the monetary authorities of Mexico, Norway, the Philippines, Switzerland and Taiwan.

While this year’s turmoil has an indicator that global stocks are headed for their biggest annual loss since 2008, the world’s biggest investors predict stocks will see low double-digit gains in 2023. Up to 71% of respondents in a Bloomberg News survey expects stocks to rise, versus 19% who forecast declines. For those who did see gains, the average response was a 10% return.