According to Cai Lian News on March 13 (Editor: Xiao Xiang), for investors in the USA stock market, the US CPI data released on Wednesday, which was significantly lower than expected, is undoubtedly a "timely rain" allowing for a breather amid the continuous market crashes. However, from the intraday performance of the US stock market and related markets, it seems that people may not celebrate too early...

Market data shows that as the US CPI for February fell below expectations, the S&P 500 Index finally rebounded after two consecutive days of significant declines, closing up 0.49%. However, the market's performance throughout the day still experienced fluctuations, and President Trump's escalation of the tariff war on multiple fronts has somewhat restrained the gains.

Meanwhile, it can be seen that amidst worries over the escalating trade war, the bond market saw an instinctive rise following the CPI data release last night, which was quickly reversed, with yields trending higher throughout the day. This undoubtedly sounds an alarm for people on such a seemingly "joyful" CPI release day.

By the close, yields on US Treasuries across various maturities collectively rose overnight, with the 2-year Treasury yield rising by 4.35 basis points to 3.9845%, the 5-year Treasury yield rising by 3.5 basis points to 4.0663%, the 10-year Treasury yield rising by 2.87 basis points to 4.3086%, and the 30-year Treasury yield rising by 3.19 basis points to 4.6277%.

Analysts indicate that while the unexpected slowdown in CPI brings some degree of comfort to traders, the uncertainty regarding the potential impact of tariffs on the economy still persists, and some voices on Wall Street continue to believe that this data may merely be the "calm before the storm."

Oscar Munoz and Gennadiy Goldberg from TD Securities pointed out that although the latest Consumer Price Index has improved, the development of trade policies leads to an unclear inflation outlook, and uncertainty still exists.

They stated, "In this context, the Federal Reserve is unlikely to change its policy guidance anytime soon."

From the perspective of specific leading Sectors, the overnight S&P 500 Index and Nasdaq Index rose primarily due to strong support from Technology Large Cap stocks and Technology momentum stocks. Blue Chip Dow Jones fluctuated between gains and losses for most of the day, ultimately resulting in a slight decline.

This can also be highlighted in the comparison where the equal-weight S&P 500 Index has underperformed the Large Cap Index (market-cap weighted).

ClearBridge Investments strategist Jeff Schulze stated that the inflation data released today is undoubtedly Bullish for risk Assets, as people are more convinced that inflation will not accelerate again as shown by the January data, giving policymakers some breathing room and allowing the Federal Reserve to ease policies when signs of labor market weakness appear.

However, the Federal Reserve needs to see inflation expectations restore from the recent rising trend before cutting rates, as the unanchoring of inflation expectations is a reason that keeps most central bank governors awake at night, and it still poses a challenge for future price stability, Schulze pointed out.

Mohamed El-Erian, the Dean of Queens' College, Cambridge, and a prominent economist, stated: "Looking back, this (CPI) is good news; but looking ahead, there is very little information within the inflation data. We still do not know how the expected tariffs and actual tariffs will transmit their effects."

The CPI data released on Wednesday did not have much impact on the Federal Reserve’s expectations for rate cuts. Traders currently expect the first rate cut of the year from the Federal Reserve to occur in June, forecasting a reduction of about 70 basis points over the entire year of 2025.

Vishal Khanduja, the head of Fixed Income at Morgan Stanley Investment Management, stated: "Regarding the current economic uncertainty, policy fatigue, and market volatility, the significance of the inflation data is not great." He believes that the market may have priced in too much expectation for rate cuts due to the resilience of consumer and corporate balance sheets.

Greg Bassuk, CEO of AXS Investment Company in New York, pointed out that "Today we saw a rebound due to inflation being lower than expected, along with some Buying on dips, but Wall Street and Main Street are still looking for direction. Investor hopes for cooling inflation are weakened by the ongoing trade war disputes. For this reason, we expect uncertainty and volatility to persist for a majority of the time until March."

Currently, despite the market rebounding on Wednesday, the S&P 500 Index is still 8.9% lower than the historical closing high reached less than a month ago. On Monday, the S&P 500 Index fell below the 200-day moving average for the first time since November 2023, which many industry insiders consider an important Resistance.

From a news perspective, the market will continue to assess Thursday's USA February Producer Price Index (PPI) report to determine its impact on the PCE data to be released on March 28.

In addition, the crisis of a government shutdown in the USA is becoming increasingly imminent. As Senate Democrats on Wednesday stated their unwillingness to compromise on the temporary funding bill passed by the House of Representatives, the likelihood of a government shutdown on Saturday is growing, and the USA 1-year sovereign CDS has doubled over the past month...

Editor/Somer