Stocks could be in for some notable swings on Wednesday after July’s consumer price index reading, according to JPMorgan. Economists polled by Dow Jones anticipate headline CPI rose 0.1% in the month, bringing its 12-month gain to 3.4%. Excluding volatile food and energy prices, so-called core CPI is expected to have gained 0.2% from June and 2.5% compared with a year ago. JPMorgan’s trading desk said the stakes are high heading into this week’s inflation readings. That’s because the latest data could be key for the Federal Reserve when determining whether to hike rates at its policy meeting in September. Fed funds futures are pricing in a nearly 52% chance that the central bank hikes rates, according to CME’s FedWatch tool. The U.S. “has dodged the proverbial bullet from the Middle East conflict in terms of seeing an inflation spike,” the trading desk wrote in a note. “Now, the market will want to see evidence that Core inflation remains sticky or if another period of disinflation is possible.” Here’s the potential outcomes for the S & P 500 based on the core CPI’s month-over-month move: Core month-over-month above 0.3%, 5% probability: The S & P 500 could decline between 1.5% and 2.5%. Core month-over-month between 0.25% and 0.3%, 25% probability: The S & P 500 may slide by between 0.5% and 1.25%. Core month-over-month between 0.2% and 0.25%, 40% probability: The S & P 500 rises in the range of 0.25% and 0.75%. Core month-over-month within 0.15% and 0.2%, 25% probability: The S & P 500 adds 0.5% to 1%. Core month-over-month below 0.15%, 5% probability, 5% probability: The S & P 500 jumps between 1% and 2%.
