The Consumer Price Index for the month of January came in above estimates, and core CPI M/M showed the largest increase since May 2023. Most risk assets are trading lower, while Crude Oil is outperforming.
Chris Chavez, Market Strategist
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Good afternoon, traders. It’s Chris Chavez with the Blue Line Futures and it’s your daily mid-day market minute. CPI comes in hotter than expectations, sending risk assets lower precious metals, stock indices, cryptocurrencies are all trading lower here today. But before we get to it, if you’re watching this video like it, subscribe if you’re on our website, there’s also a link to direct you to YouTube.
You can subscribe that way. We’d love for you to follow us. We would love for you to help us build our following. So we got some inflation data here this morning. CPI and Corp CPI numbers year over year and month over month. Now when you’re looking at the month over month increases that we saw, this was actually the largest increase, the largest month over month increase in core CPI that we saw since May of last year.
And the largest month over month increase in CPI itself since September of last year. So, you know, really this is putting a lot of, you know, pressure on stock indices, precious metals, cryptocurrency risk assets as a whole, you know, taking a leg lower here today. And really what is fueling that, Treasury yields, you know, we’re seeing the ten year yield above 425 basis points today.
And when you look at interest rate cut expectations, we have seen these massively reduced. Now seeing a 41 to 42% chance of a cut in May. And when looking at the Fed Funds futures pricing in about 84 basis points worth of cuts moving even closer to the Fed’s summary of economic projections, where the median estimate between FOMC members was 75 basis points.
So now the markets and the Fed are pretty much hand in hand with interest rate cut expectations, which is really interesting to see. You know, that that’s one way that the markets have gotten ahead of themselves this year As far as interest rate cut, expectations are concerned coming into the year 6 to 7 cuts on the table. Now we’re seeing about three cuts on the table.
So you’ve seen interest rate cut, expectations slashed, but the Fed’s expectations have remained constant. So really expectations are starting to align now. And this was just a classic case of the markets getting a little bit ahead of themselves and ahead of itself as a whole, especially with hotter than expected CPI numbers here today. Now, Willy, tomorrow there won’t be a lot of economic data to pay attention to.
There will be some crude inventories numbers. But later this week, we’re going to get more jobs, data, initial and continuing claims, manufacturing data, pie, Michigan, one year, five year inflation expectations, all of which are still going to be pivotal for, you know, expectations and also how equity markets will continue to trade. And one thing I do want to highlight when you look at how the interest rate landscape is right now, specifically the ten year yield or trading at the highest level seen since December 11th or so.
And when you look at the gold market, specifically the front month futures contract, we are now trading at that same December 11 level. So as yields are elevated to this spot, gold has come down to that spot as well. But when you look at stock indices, of course, that’s not the case. Why? Because fundamentals, earnings matter, growth matters.
They don’t stock indices do not trade like commodities. So when you look at some of these commodity markets trading where the ten year yield is, you know, or was back in December, and now gold is at this level. So, you know, if you do start to see some weakness come through again, this is really the time where you do want to start to have some exposure to some of the precious metals, other areas, industrial metals as well.
Now some of these major support and resistance levels to highlight that we put out in our research. If you haven’t caught a trial of our research, be sure to sign up Blue Line futures dot com. You can catch a free two week trial and we put out daily reports covering the macro markets as well as grains, agriculture and other energies as well.
Looking at some of these three star and four star support levels that we’ve highlighted, a three star level to pay attention to for the S&P 49, 74 and three quarters to 4978 in the quarter. The Nasdaq a three star support level, 17 554 to 17, 565. I don’t want to see the markets break in close below here. If we do, we could see a little bit more liquidation.
These are very significant levels to keep an eye on. Crude oil positive territory here today, you know, reversed off of the lows a little bit and pushing higher major overhead resistance, four star level. That’s the most significant level, 1479 29 to 79, 65. You want to see a break in close above there to continue to lift higher silver three star support.
This has been a major line in the sand for the silver market and I don’t want to see us close below here. 2204 to 2205 If you have any questions, reach out to our trade desk. We’re here for you. Remember, futures trading involves substantial risk of loss and is not suitable for all investors.