Wednesday, March 16, will see four sets of crucial data hitting Wall Street all at the same time. Although it may not be apparent now, all four are intimately connected and interdependent, and what we see on Wednesday could help determine trends in commodities and bond markets particularly.

First we have housing data to be published prior to market open at 8:30 a.m. ET. Housing starts have went down for two consecutive months since November, and haven’t yet overtaken the June 2015 high of 1.2 million. The market is expecting a jump up to 1.14 million, and there is no reason not to expect a jump because housing starts have not declined for three months in a row since September 2008. An upside surprise is possible because of the relatively warm winter across the United States, which could help push forward more building projects than otherwise.

At the same time we will have inflation data, both February Consumer Price Index (CPI) and core CPI being released. Here is where we may have a significant upside surprise in relation to market expectations, for core CPI specifically, which subtracts food and energy prices. An upside surprise would normally include CPI as well, along with core, if not for the fact that February saw oil in a range from $26 to $34 for the whole month. Core CPI rose 0.3% in January, with the market expecting only 0.1% this time. That expectation is probably too low since March is typically the time of the year when price inflation moves higher. An interactive chart by PriceStats shows how prices tend to head higher around this time of year and into May, so a lower reading from January to February, at least for core CPI, seems remote.

An upside surprise could propel commodity markets higher.

Closely related to the CPI numbers is the Federal Open Market Committee (FOMC) rate decision, due at 2:00 p.m. There should be no surprises here as expectations are that the Federal Reserve will keep rates unchanged. They will probably keep them unchanged until the CPI goes above their target rate, and it is not doing that yet. The real question is what happens though April and May, when CPI typically peaks for the year? If by May those numbers exceed a 3% annual inflation rate, then the Fed may hike again at the June or July meeting, but probably not before that.

Finally, we have oil inventories. West Texas Intermediate (WTI) crude is holding above $38 a barrel as the trading week begins. We are likely to see a correction back down soon after this 50% rally since mid-February. An upside surprise in crude inventories may help us toward that direction. On the other hand, if we see a surprise inventory draw coupled with higher core CPI numbers, then oil prices may rally a bit further, but not much further for now, given how far we’ve already come from $26 in February.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.