On Thursday, following a higher-than-anticipated CPI print, 8.2% v. expected 8.1%, a shock turnaround in equities sent Wall Street searching for something -- anything -- to explain how yet another red-hot inflation number translated into one of the best days of the year. Among the answers: increasingly sturdy positioning including well-provisioned hedges, a watershed moment for chart watchers, and several less-than-terrible earnings reports. Throw in some short covering, and the result was a trough-to-peak run-up in S&P 500 futures that reached 5.6% at its widest point during the day.
Expect the unexpected has become the only mantra in a market when crosscurrents are flowing from every direction, including a Federal Reserve bent on subduing inflation while keeping half an eye on financial stability. Thursday’s turnaround came after the S&P 500 erased half its climb from 2020’s pandemic low, a hit to wealth that while showing no sign yet of curbing inflation, may one day play a part in achieving that goal.