S&P 500 Holds Ground Above 4,400 Ahead of Key Inflation Data: What to Expect Next

investing.com:

Stocks finished yesterday's session lower ahead of CPI report. Expectations are for headline CPI to increase by 0.1% month-on-month and 3.3% year-on-year, down from September’s increase of 0.4% m/m and 3.7% y/y reading. Core CPI is expected to rise by 0.3% month-on-month and 4.1% year-on-year, in line with last month’s reading.

The core CPI, if it comes in as expected at 0.3%, would be a number not consistent with the Fed 2% target, and more importantly, it does run the risk of coming in hotter than expected given the reset in the Health Insurance piece, which feeds into the Hospital and Related services and the broader Medical care services.

The weighting for medical care services is about 6.3% in headline CPI and higher in the core CPI. That will be the sector to watch today because the days of health insurance falling by 3 to 4% per month will be gone, and we should see health insurance rise by 1 to 2% per month.

Currently, with a weight of 0.545% in CPI, the Health Insurance will go from subtracting from Medical care services and will become addictive. Medical services did start rising again after months of falling, and the health insurance component could add to this change in trend if it should persist.

Meanwhile, the S&P 500 remains pegged to the 4,400 region as we approach opex, as gamma builds up at the 4,400 strike price, making it hard for the S&P 500 to escape from that region, at least today. That, of course, could change today, depending on the CPI report.

There is a lot of positive delta on the board for Friday’s OPEX, and if we do get a hot CPI report today, and the indexes do start to move lower, the value of call options will start decaying quickly, and that will mean there will market makers would have