How U.S. CPI Data Impacts Stock and Bond Markets

CPI (released mid-month at 8:30 AM ET) is one of the market's most important inflation gauges. Impact mechanism: Hot CPI (Core MoM ≥0.4%) → 'higher for longer' rate expectations → 10-year yields can jump → equity P/E compression, especially for long-duration assets (tech, growth stocks). Cool CPI (Core MoM ≤0.1%) → rate cut hopes rally → yields fall → growth stocks and bonds can strengthen. Key details: (1) Core CPI (ex food & energy) usually moves markets more than headline. (2) The Shelter component (~36% of CPI) is lagging — use 'Supercore' (core services ex-shelter) to read services inflation pressure. (3) The round-to-one-decimal trick: a 0.247% MoM rounds to 0.2% (benign) while 0.251% rounds to 0.3% (hot) — tiny differences can cause outsized reactions. (4) Year-over-year base effects can distort the reading — always check MoM and 3-month annualized. (5) CPI surprises of ≥0.1% vs. consensus can move SPX meaningfully on the day, especially when inflation is the market's main focus.