Well, equities are higher to start the session, which shouldn’t surprise you.

After all, we got some bad data this morning. Remember what we said just prior to the CPI print? Here’s a reminder:

Of course the difficult thing is figuring out how to trade this. Because if you’re long risk, you don’t want a print that’s too good, otherwise the Fed has the green light to squeeze you by getting more aggressive with the normalization push, but then again, you don’t want it to be too bad either, because that means the economy might be going to shit.

Right. And the number missed. Guess what people immediately did? Why, they fled to the “safety” of overvalued, high-flying tech stocks, that’s what they did:

Why would people do that? Simple: because after the disappointing data, the chances of a September hike fell to less than 10% and the odds of another hike this year dropped to 40%.

If you’re Goldman, the odds of a September hike are even lower. Here’s the bank’s post-mortem…

Via Goldman

Core CPI inflation was lower than expected for the fourth consecutive month, though the year-over-year rate remained stable and prices in the large and persistent shelter and healthcare services categories both accelerated. Retail sales were weak – with an outright decline in the key control gauge that was four tenths below expectations – reflecting relatively broad-based softness. We adjusted down our Fed odds accordingly.

On net, we viewed the details of the CPI report as modestly encouraging relative to our previous expectations. However, we doubt the FOMC will view this fourth consecutive miss in the same light.

Given this and the weaker retail sales data, we now think that there is a 5% (vs. 10% previously) probability that the next rate hike will come in September, a 5% probability that it will come in November, and a 50% (vs. 55% previously) probability that it will come in December. Cumulatively, this implies a 60% probability (vs. 70% previously) of at least three hikes this year.

Now if only we could get some more bad data, we could push the Nasdaq up to a 3% gain on the week from the 2%+ we’ve already clocked…