The latest consumer price index reading is around the corner, and the outcome could sway the stock market, according to JPMorgan’s traders. The January consumer price index due Tuesday morning is expected to continue the recent trend of easing inflation. Economists polled by Dow Jones anticipate a rise of 0.2% last month, and a 2.9% increase from the year-ago period. That’s down from increases of 0.3% and 3.4% in December, respectively. Core CPI, which excludes volatile food and energy prices, is also expected to remain in line or trend slightly lower. Prices are forecast to have increased 0.3% on the month and 3.7% on the year, according to consensus estimates. That’s compared to December’s gains of 0.3% on a monthly basis and 3.9% from the 12 months prior. Investors are hoping a downward trend in inflation means the Federal Reserve can start to cut interest rates, so a stronger-than-expected reading has the potential to ding stocks. Meanwhile, a cooler reading could drive equities higher. Investors got a small window into how stocks could perform Friday, when a downward revision in December’s CPI reading sent equities higher. Broadly speaking, however, JPMorgan traders do not expect the reading will change the narrative around rate cut expectations, which have moved out to May or June. Markets are pricing in a 52% chance of a quarter-percentage-point cut in May, according to the CME FedWatch Tool. Given this, JPMorgan’s U.S. market intelligence group laid out five scenarios to how the S & P 500 may react to Tuesday’s month-over-month core CPI reading: 45% chance — A rise between 0.2% and 0.3% could suggest “disinflation firmly entrenched,” an outcome in line with Fed Chair Jerome Powell’s expressed desire to see more “good data” in inflation readings. JPMorgan traders expect the S & P 500 could rise 0.5% to 1%. 25% chance — Between 0.1% and 0.2%. This scenario could boost demand for longer duration bonds and bolster some of the sectors that have been underperforming. The S & P 500 may gain 1% to 1.5% here. 22.5% chance — An in-line reading between 0.3% to 0.4% would still add to worries core inflation is stickier than anticipated, with traders parsing the difference in core goods and core services. A higher core goods reading could suggest conflict in the Red Sea is starting to be felt in the supply chain. In this scenario, JPMorgan traders anticipate a 1% to 1.5% decline in the S & P 500. 5% chance — An outcome below 0.1%, probably because of a weaker-than-expected gain in housing prices, could mean a “collapse in bond yields” that triggers an “everything rally” in stocks. March rate cut expectations would also fly back above 50% in this scenario. The S & P 500 could rally 2% to 2.25%. 2.5% chance — A hotter-than-expected reading above 0.4% will likely have an outsize effect on Treasury yields, with rate cut expectations moving out to later in the year. It will also likely add to a “material” number of investors questioning whether rate hikes are still on the table for this year. Traders expect the S & P 500 could lose 1.75% to 2.25% in this scenario. — Tech Zone Daily’s Michael Bloom contributed to this report.