As expected, stocks tumbled following the release of the September CPI report.
The Consumer Price Index (CPI) — a measure of prices consumers pay for goods and services — increased by 0.4% in September and rose by 3.7% year-over-year. This exceeded economists’ forecast of a 0.3% monthly increase and a 3.6% annual increase.
Unsurprisingly, the S&P 500, DOW, and Nasdaq finished lower in the last session…
But then, you don’t care if prices increase or decrease when you’re a seasoned trader.
You just care that they move because you can profit from both sides of the price action.
Here are other takeaways from the September CPI report:
- The main contributor to the inflation increase was shelter costs, which rose by 0.6% for the month and 7.2% annually. Service prices, excluding energy, rose by 0.6% and were up 5.7% per year. This is a key indicator of long-term inflation.
- Excluding food and energy prices, the core CPI increased by 0.3% in September and 4.1% over the last 12 months. These figures were in line with expectations.
- New vehicle prices increased by 0.3%, while used vehicle prices decreased by 2.5%. Used vehicle prices had been a major driver of inflation during the early days of the COVID-19 pandemic but were down about 8% from a year ago.
- Hourly earnings fell by 0.2%, and wholesale prices increased by 0.5%, pushing the 12-month rate to 2.2% (0.2% above the Federal Reserve’s 2% inflation target).
- The September CPI report comes at a time when the Federal Reserve is contemplating its next policy move. Minutes from their September meeting showed divisions about further interest rate hikes to combat inflation, suggesting a complex economic landscape with uncertainty about what they’ll do next.
As I said yesterday, the market doesn’t react well to this uncertainty.
This explains the roller coaster across major stock indexes such as the S&P 500, Dow Jones, and Nasdaq). But as traders, we don’t care which way prices move. We only care that they move because there’s always room to profit from both sides of the price action.
See how to trade both sides of the price action for 2-3x returns on your money.