us inflation reports are no longer eliciting the outsize swings in us stocks that investors witnessed during 2022 one longtime stockmarket strategist and trader offered an explanation in an interview with marketwatch after more than a decade of nearirrelevance monthly reports on consumerprice inflation emerged as marquee events for markets last year surpassing even the monthly nonfarm payrolls number released by the department of labor in terms of their impact the sp 500 recorded its biggest daily swings of 2022 following the release of monthly cpi numbers including on sept 13 when hotterthanexpected august data sent the sp 500 down 43 and on nov 10 when weakerthanexpected october numbers helped send the largecapitalization index rallying 55 but something seemed to change by the start of the new year that blunted the impact that monthly cpi reports were having on markets the sp 500 exhibited an average move of 19 in either direction on cpi release days in 2022 according to an analysis by dow jones market data and marketwatch that figure has shrunk to 07 since the start of 2023 through wednesday following the release of the march inflation report interestingly the reverse is true for the producerprice index the premier us data on wholesale prices although the market response to ppi has typically been more muted the sp 500 logged an average swing of 08 in response to ppi data released in 2022 but the average move following the release of ppi data in 2023 has increased to 12 the next ppi report will be released thursday what changed exactly steve sosnick chief strategist at interactive brokers and a former trader at storied investment bank salomon brothers shared a few thoughts in a phone interview with marketwatch first it’s important to remember what the setup for markets was heading into 2022 the federal reserve was still insisting that inflation which had already perked up in 2021 would be transitory on dec 31 2021 fed funds futures were anticipating that the central bank’s policy rate target would rise to 1 in february 2023 that prediction ended up being way off base instead the fed delivered another 25 basis point hike at its february meeting bringing the upper bound of its target range to 475 it followed that with another 25 basis point hike in march bringing the target to 5 after more than a decade of rockbottom interest rates the fed’s aggressive rate hikes in 2022 came as a huge shock to markets what’s more us gross domestic product growth briefly faltered and turned negative for two consecutive quarters in the first half of 2022 although the national bureau of economic research the official recession arbiter didn’t declare that one had occurred negative growth revived fears that the us economy might become mired in stagflation which eased when the economy returned to growth in the second half of the year sosnick said “the fed moved way faster than markets had priced in” sosnick said “that really freaked people out” investors’ apparent apprehension lingered until late into 2022 by the time data for december were released headline cpi had cooled to 65 yearoveryear after surging as high as 91 according to the june report which was released on july 13 that marked the highest level in more than four decades to be sure us stocks are looking much calmer in 2023 than they did in 2022 when the sp 500 declined by more than 19 according to factset data the rolling sevenday average percentagechange for the sp 500 has fallen to less than 03 as of wednesday the lowest level since november 2021 according to djmd other analysts have noted the declining relevance of inflation data brian levitt global market strategist at invesco said in emailed commentary on wednesday that focusing on inflation now seems “almost passe” instead investors are shifting their focus to whether the fed’s aggressive tightening will cause another recession a possibility that was noted in the latest batch of fed meeting minutes released wednesday after initially rallying following the release of the march cpi data the sp 500 spx finished off 04 on wednesday the nasdaq composite comp fell 09 the dow jones industrial average djia declined by 3829 points or 01 the data showed the yearly rate of consumerprice inflation slowed to 5 in march down from 6 a month earlier touching its lowest level since may 2021 that was roughly in line with the median forecast of 51 from economists polled by the wall street journal traders are set to receive the ppi report thursday morning at 830 am eastern time the prior month’s data showed headline producer prices declined to 46 in february on a yearoveryear basis