Options traders whipsawed by the stock market’s recent gyrations are getting anxious that more bouts of volatility may arrive in the coming days, starting with Wednesday’s report on consumer prices.

Soaring bond yields and robust jobs data have put extra focus on the next consumer price index report. The S&P 500 Index is expected to move 1% in either direction on Jan. 15, based on the cost of at-the-money puts and calls, according to Stuart Kaiser, Citigroup Inc.’s head of U.S. equity trading strategy.

That’s the largest implied move ahead of a CPI print since the regional bank turmoil in March 2023.

For a sense of what’s on the line, the reading rivals the implied move on Jan. 29 — the Federal Reserve’s upcoming interest-rate decision — and is higher than the next jobs report, due on Feb. 7.

Traders expect the CPI figures will offer clarity on future rate cuts this year as several big banks have changed their forecasts to fewer or later-starting reductions, with Bank of America Corp. saying they now expect none. The shift in tone has helped drive stocks lower to start the year.

“Given the elevated volatility, a cool CPI number could quickly rally the S&P 500 back above 5,900,” said Brent Kochuba, founder of options platform SpotGamma. “We now see some large long put positions below that, so if CPI is hot then we could see the S&P 500’s rate of decline increase, which would correspond with a big VIX jump.”

Concern about sticky inflation and the Fed’s path to contain it has pushed the Cboe Volatility Index toward 20, a level that signals concern among traders, as the S&P 500 wiped out its gains for the year. Measures of expected and realized volatility are both starting 2025 at above-average levels, according to derivatives analytical firm Asym 500.

Overall, the rise in volatility and higher premiums for puts has made broader stock market hedging more attractive, says SpotGamma’s Kochuba. One-month realized volatility is hovering around 16, which itself justifies VIX being in the 18 to 20 range, he said.

The reaction in options markets ahead of the CPI data demonstrates how investors are growing more sensitive to inflation reports once again. Last year, stocks had relatively muted reactions to consumer-price signals as inflation eased and focus shifted to the employment part of the Fed’s dual mandate following the most aggressive rate-tightening cycle in decades.

The CPI report will add to the mosaic of data prints U.S. traders will need to parse for additional clues on the Fed’s interest-rate path. The Institute for Supply Management’s index of services print on Jan. 7 — which showed a measure of prices paid for materials and services surged to the highest since early 2023 — sent the tech-heavy Nasdaq 100 Index down 1.8% in its worst day since mid-December.

Then, separate data on Friday showed the U.S. economy added the most jobs since March in December, supporting the case for a pause in rate cuts.

Still, investors are preparing for a cooler number at the close of 2024.

Wednesday’s CPI report, set to be released at 8:30 a.m. in Washington, is forecast to show the core reading — which excludes food and energy costs — to have risen by 0.2% in December from a month earlier, down from 0.3% in November. That would leave the core gauge up 3.3% from a year earlier — above the Fed’s 2% target — though matching readings from the prior three months.

If core CPI jumps more than 0.3% from the prior month, the S&P 500 will respond with a drop of as much as 2%, according to JPMorgan Chase & Co. Market Intelligence team led by Andrew Tyler. He sees just a 5% chance of that happening.

In the most likely scenario laid out by the team, core CPI comes in between 0.17% and 0.23% from a month ago, and the S&P 500 gains between 0.3% and 1%, according to Tyler. A print below 0.1% may spark a rally between 1.8% to 2.5% in the S&P 500, Tyler added.

Fourth-quarter earnings season will also officially kick off on Wednesday, led by financial bellwethers JPMorgan Chase & Co., Citigroup Inc. and BlackRock Inc., which could also contribute to outsized swings.

“Volatility is heightened into these macro events now,” said Chris Murphy, co-head of derivatives strategy at Susquehanna International Group.

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