The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Trending
Stocks want to follow the trend higher. Overnight trading was unremarkable and S&P futures traded up small prior to the PPI (6.0% vs 4.8% est & 4.3% prior revised from 4.0%) release. That hot inflation sent futures down and yields up. The index opened flat, dropped 25 points early and then bounced and rallied for the rest of the day. Dip-buyers weren’t concerned about the hot inflation. Treasuries didn’t turn as much as stocks did but they did turn about the same time as stocks. Crude did the inverse. All this suggests that the market shrugged off the inflation data and proceeded with the war-is-lessening trades. US/Iran headlines didn’t report any breakthroughs though. Mag 7 stocks led the way higher with Alphabet in front, up more than 3% on the day.
The Megacap stocks dragged the S&P 500 higher today. Losers outnumbered gainers 2:1 but because the index still climbed a significant amount thanks to Nvidia, Alphabet, Apple, Amazon, Tesla, and Meta. Some look at the dwindling breadth as a sign of the beginning of the end. Perhaps. But until the market actually rolls over, it’s not the end. There is a possibility that the earnings growth from AI that is benefiting the Megacaps now, will benefit the lessercaps later. The rest of the market will benefit from efficiency once they incorporate the AI technology, which will take time.
If that’s true, it makes sense for the Megacaps to lead and then the othercaps to catch up later. Is that what we’re witnessing? The bulls think so. The bears disagree.
We will only know the answer many months, and earnings seasons from now. So until the proof is in the pudding, we’re trading on sentiment and narrative.
Both are still bullish. And the trend continues.
See you tomorrow.
-Mike
Visdom Market Commentary
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