Stocks Jump During Overnight Session as CPI Shows Cooling Inflation

Stocks rallied during the overnight trading session on Wednesday as the latest inflation print offered some hopeful news.

Wall Street celebrated on Wednesday as the Consumer Price Index came in below analysts’ expectations and showed that inflation eased last month to its slowest pace in over two years. CPI climbed 3.0% in June from a year prior, the Labor Department said Wednesday, less than the 4.0% increase in May and significantly lower than its 9.1% peak in June 2022.

The highly anticipated monthly CPI reports are released prior to market open (at 8:30 AM ET), triggering positive returns in the overnight session. Notably, there has been very little movement in the daytime session on Wednesday, as all gains came in before markets opened.

At market close Wednesday, the SPDR S&P 500 ETF Trust (SPY) was up 0.80%. The night contributed 0.89% of performance, while the day session declined 0.09%, according to the NightWatch Mobile App.

How Stocks Reacted to Past CPI Reports

The overnight session has demonstrated that it is more reactive to CPI releases than the day session. Since January, the night session has been up when actual CPI comes in below the consensus estimate and has declined when CPI comes in above consensus. Conversely, the day session’s performance has been mixed.

See more: “Night Session May See Greater Returns From CPI Release

During the first half of 2023, large-cap stocks (measured by SPY) reacted positively to CPI reports during five out of the six releases. The one occasion in which large-cap stocks declined during the night session in response to the CPI release was in February, when the CPI print for the month prior came in above expectations.

The day session, however, has reacted negatively two times. On both occasions, in April and May, actual CPI had beat analysts’ expectations and the night session saw positive returns. In April, the day session was down 0.93% while the night was up 0.53%. In May, the day session declined 0.25% while the night was up 0.72%.

While NightShares 500 ETF (NSPY) offers exposure to the night performance of the S&P 500, the NightShares 500 1x/1.5x ETF (NSPL) leverages the night while maintaining daytime exposure.

NSPL seeks to provide returns that correspond to 1x the performance of a portfolio of 500 large-cap U.S. companies (comparable to the S&P 500) during the day and 1.5x the portfolio performance at night.

For more news, information, and analysis, visit the Night Effect Channel.