Why Leverage the Night Session Before Thursday’s CPI Report

Tilting toward the night has been an effective strategy to capture Wall Street’s reaction to CPI releases.

The night session has been more reactive to CPI data than the day session in 2023. During the first half of the year, the night session rallied after every CPI print except for in February, when the actual CPI came in above expectations. Conversely, the day session’s performance has been mixed and less predictable.

The Bloomberg consensus estimate (median) for July CPI, to be released on August 10, is 3.3%. If actual CPI comes in below consensus, the night session is expected to rally on the news.

The phenomenon whereby equities have historically performed better during the night session when local exchanges are closed than during the day when markets are open is referred to as the night effect.

The timing of information flow and availability is a frequently stated rationale for the night effect. Monthly CPI data is released prior to market open (at 8:30 AM ET) during the night session. Additionally, around 95% of U.S. companies release earnings during the night session.

The NightShares 500 1x/1.5x ETF (NSPL) enables investors to leverage their exposure to the night session in a cost-effective and efficient way. The fund aims to provide returns that correspond to 1x the performance of a portfolio of the S&P 500 during the day and 1.5x the portfolio performance at night.

Last month, actual CPI beat the Bloomberg consensus estimate by about 10 basis points. At market close on the day of the CPI release, the SPDR S&P 500 ETF Trust (SPY) had rallied 0.80%. Notably, the night contributed 0.89% of performance, while the day session declined 0.09%, according to the NightWatch Mobile App.

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