CPI Good Enough for Risk-On

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, Aug. 12.

Read the latest update to the Contrarian Investment Portfolio.

State of Play

The Consumer Price Index came in almost exactly as anticipated. As we eye or board of indicators for signs of direction at 0840 ET, these have moved to risk-on as a result:

• Stock index futures are pointing to gains led by small caps (usually a good sign):

  • Russell 2000 +1.3%

  • Nasdaq +0.7%

  • S&P 500 +0.6%

• Bonds are also showing gains, with the 10-year yield down 3 basis points to 4.26% (yields move inversely to prices);

• Cryptos are flat. Bitcoin effectively unchanged trading around $118,800;

• Commodities aren’t doing anything:

  • WTI crude oil -0.5%

  • Copper flat

  • Gold/silver flat

Known Events

The monthly CPI came in as expected but that still pushed the annualized Core CPI up to 3.1% from 3.0%. Headline CPI for some reason dropped on an annualized basis, to 2.7% from 2.8%. Ultimately that makes this whole thing a wash, which is good enough for markets to rally.

Cover art by author via Grok AI