Written before the PPI release I’m guessing everyone already knows the reason for the recent drop—it’s mainly because yesterday’s CPI data was off the charts. The market is worried this might push the Fed to be more aggressive. Based on CME’s forecast data, the rate hike probability has jumped from 20% to over 50%. The market should’ve been gradually calming down, but tonight we’ve got another inflation data point coming: the PPI release. Although many folks don’t pay much attention to PPI, just remember that combining PPI + CPI gives a rough idea of the PCE data, which is what the Fed cares about most. Since yesterday’s data was off the charts, the market is pretty worried that today’s data might also exceed expectations, so the mood is still pretty tense. However, based on current market forecasts, PPI’s annual rate is expected to slightly decrease, while the monthly rate is expected to slightly increase. If the data aligns with expectations, market panic will definitely ease. Also, there’s a retail data release today that’s quite important. But considering the current inflation, a drop in retail sales is somewhat normal. Plus, this month’s labor data hasn’t been great either. The idea was to rely on weaker labor data to ease rate hikes, but now inflation expectations are rising, and so is the probability of rate hikes. In short, if PPI data also exceeds expectations, market sentiment will worsen. If PPI data comes in below or meets expectations, the market might calm down a bit. A shoutout to @Gate, trade more markets!