Cool CPI Inflation Fuels a Market Rally

CPI data comes in below estimates … relief from the soaring 10-year Treasury yield … Trump’s coming “energy dominance” … how Eric Fry is playing AGI
This morning, we received the second and more important inflation report of the week – the Consumer Price Index (CPI). Fortunately, the numbers came in soft, triggering two reactions.
The 10-year Treasury yield is plummeting, and the stock market is surging.
Beginning with the CPI details, the monthly headline number climbed a seasonally adjusted 0.4% in December, while the year-over-year number came in at 2.9%. Economists had been expecting readings of 0.3% and 2.9%, respectively.
Year-over-year core CPI, which removes volatile food and energy prices, clocked in at 3.2% with a monthly reading of 0.2%. This was lower than the respective forecasts of 3.3% and 0.3%.
A large driver of inflation was energy prices, which accounted for roughly 40% of the CPI’s gain. Shelter prices, which make up about one-third of the CPI, rose 0.3% (monthly) and 4.6% (yearly). That’s the smallest one-year gain since January of 2022.
Stepping back, this reading isn’t likely to result in more or faster rate cuts from the Fed, but it is relieving enormous inflation-related anxiety that’s weighed on the market for the last month. And that has Wall Street cheering.
As I write at lunchtime, all three major indexes are up big. The Nasdaq leads the way, nearly 2% higher.
Our hypergrowth expert Luke Lango predicted this. Here’s what he wrote last Friday in his Innovation Investor Daily Notes:
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