Wall Street: CPI higher than expected will not impact US stocks

Wall Street trading desks expect Thursday's release of the U.S. Consumer Price Index (CPI) to show inflation on the high side, but they don't anticipate significant stock market volatility, as the jobs data has become central to the market narrative. Stuart Keiser, head of U.S. equity trading strategy at Citigroup, said options traders are betting the S&P 500 will fluctuate by about 0.7% in both directions following the CPI release. This is lower than the actual daily volatility of 0.9% over the past year, and lower than the market's expected volatility for the next jobs report on October 3rd. Keiser even believes that this implied volatility is still too high. It all has to do with how traders deduce the Federal Reserve's interest rate path. U.S. jobs data has shown signs of weakness that threaten economic growth, leading the market to expect the Fed to cut the federal funds rate by 25 basis points at the end of its September 17 meeting, with the possibility of further rate cuts in its October and December meetings. (Jinshi)