CPI Moves Markets Green, For Now

After a bleak weekend for markets fearful of the ongoing banking crisis, equities and cryptos saw a mild turnaround Tuesday on promising inflation data that may signal a more dovish Federal Reserve next week. 

Prices in February rose 6% year-over-year, Consumer Price Index data released Tuesday shows. Goods marked a 0.4% month-over-month price increase, compared with a 0.5% monthly increase in January, which is in line with analysts’ expectations. 

Core CPI, which excludes food and energy, rose 0.5% month-over-month and 5.5% over the year. 

Cryptos rallied on the news, with bitcoin initially surging over 7% doubling the rate of ether’s rise — up 3.5% immediately following the release of the report. Equities moved into the green during pre-market trading, with the S&P 500 and Nasdaq Composite indexes gaining close to 1% each. 

Bitcoin dominance is now at its highest level since June 2022.

While cryptos have bounced on recent news of bank closures and government bailouts, stocks have struggled this week. The Nasdaq Composite and S&P 500 indexes are both trading more than 4% lower in the past 5 trading days, cutting into what appeared to be promising year-to-date gains up until recently. 

February’s inflation numbers were primarily driven by housing costs, the Bureau of Labor Statistics noted, with shelter accounting for over 70% of the monthly increase. Airfare and household furnishings also saw price increases last month.

The Fed is set to convene next week for its policy-setting meeting. The central bank’s rate decision will be released Wednesday, March 22. Markets are still confident that the Fed will opt for a 25 basis point increase, with CME futures pricing in an 81% probability as of Tuesday morning.

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