The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Cool enough
CPI (3.4% vs 3.4% est & 3.5% prior) was as expected. Equity futures jumped and bond yields fell. There was a bit of a hectic trading and back-and-forth action in the immediate aftermath but the initial reaction held into the open. The S&P opened about +30 and spent the day comfortably positive. Yields came in mostly, although the 30 year backed up by the afternoon. Crude was little changed and had immaterial influence on US stocks. Information technology and real estate led among all sectors today. Materials and consumer discretionary lagged. Capital flow was light again, 83%.
Fed Funds futures are pricing a September Fed hike at 40% today. This is down 10% from yesterday. Today’s inflation data is not a slam dunk cold surprise so the situation is still dynamic but the Fed *should* hold rates come September and that probability should lessen as we approach the meeting. Of course, we need more confirming data for that path to realize. In the meantime, we gotta go through another version of today’s inflation-data-dance tomorrow.
PPI (4.9% est & 5.5% prior) will probably not influence the market as significantly *unless* there’s a big surprise. If the data prints as expected, it will be interpreted as a confirmation of the inflation-is-coming-down outlook. That *should* get the bond bulls in motion and the equity bulls should follow suit.
There are a lot of ifs in the above paragraph but the odds favor the bulls currently. Good data will trigger an impulse higher for stocks and that *should* start a new leg up the upward trend. Chart-followers and momentum players are looking for a fresh breakout to new all-time highs. A modest rally tomorrow would do it.
The prior all-time high is 7794. It’s not very far away, especially if the markets get confidence that the Fed won’t ruin the party.
See you tomorrow.
-Mike
Visdom Market Commentary
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