Stocks Volatile As CPI Inflation Meets Expectations, Attention Shifts To The Fed's Next Move

The SPDR S&P 500 SPY is volatile Tuesday morning after the Labor Department reported a 6% year-over-year increase in the consumer price index (CPI) for February.

What To Know: The headline CPI rose 6% in February, down from 6.4% in January, according to data the Labor Department reported on Tuesday. The closely watched inflation reading was in line average economist estimates.

On a month-over-month basis, CPI was up 0.4%, which was also in line with estimates. Core CPI topped expectations on a month-over-month basis, rising 0.5% against a 0.4% estimate. 

Core inflation, which excludes volatile food and energy prices, was up 5.5% last month, matching economist estimates.

The Labor Department said energy prices were up 5.2% year-over-year, while food prices climbed 9.5%.

Why It Matters: The print is likely another sign that the Federal Reserve will opt for a less aggressive rate hike at its next meeting later this month. 

Chances for a more aggressive 0.5% hike steadily climbed last week amid the Fed's semiannual Monetary Policy Report and hawkish comments from Fed Chair Jerome Powell before a series of bank runs completely changed market expectations.

The biggest banking collapse since the 2008 financial crisis was spearheaded by a bank run on SVB Financial Group SIVB last week, and although customers will be made whole, the Federal Deposit Insurance Corporation (FDIC) shut down the bank and placed it under receivership.

There is lingering uncertainty about potential contagion in the rest of the financial sector as a result of rapidly rising interest rates, which has tilted projections back toward a 0.25% hike.

Related Link: Why Silicon Valley Bank Collapsed: A Simple Explainer

Powell noted in his exchange with Congress last week that he planned to "scrutinize" Tuesday's CPI data and highlighted its importance.

"We have not made any decision about the March meeting. We're not going to do that until we see the additional data," Powell said. 

Tuesday's CPI print looks to be building a stronger case for those anticipating a 0.25% rate hike at most at the Fed's next meeting on March 22. 

SPY Price Action: The SPY was up 0.51% at $387.33 at the time of writing, according to Benzinga Pro.

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