We have had two very massive developments since final week — two hotter-than-expected inflation studies…and the S&P 500’s (SPY) response to them says lots about the place we’re proper now by way of the continuing bull/bear tug-o-war recreation. Maintain studying to seek out out what it is saying….
(Please get pleasure from this up to date model of my weekly commentary initially revealed February 16th, 2023 within the POWR Shares Below $10 publication).
Market Commentary
On Tuesday, we obtained the newest month-to-month Client Value Index (CPI) report from the Bureau of Labor Statistics.
The report confirmed costs rose 0.5% month to month and are up 6.4% up to now 12 months. Each of these numbers have been larger than most economists anticipated.
After buyers spent 2022 shopping for and panic promoting on inflation-related knowledge, it appeared like a certain factor that we would get large promoting… on each days, however Tuesday ended up flat (with the Nasdaq index really up), and all three main indices have nearly totally recovered their losses from this morning.
Then, this morning, we obtained the January Producer Value Index (PPI) report. Once more, PPI confirmed costs rising (at a price of 0.7% month over month), which was quicker than the 0.4% price economists predicted.
It seemed like we have been going to get a repeat of Tuesday, with shares falling on the information after which recovering their losses earlier than the shut.
After which, within the final hour of buying and selling, the market tumbled once more. In the long run, the S&P 500 (SPY) closed down 1.4%. The Nasdaq closed down 1.8%.
So, what is the deal?
It felt like Tuesday’s outcomes have been already considerably baked into market costs. Actually, on Tuesday, I wrote…
Everyone knows by this level that inflation isn’t going to easily drop in a straight line over the following few months, however inflation continues to be down considerably from its peak. Buyers seem to have come round to the concept that the Fed most likely will not decrease rates of interest in 2023 — one thing Fed Chair Jerome Powell has been saying for months.
And even so, buyers have not offered off all their holdings in a panic.
In different phrases, the bulls are profitable this spherical of tug-o-war, and buyers are “threat on,” shopping for up shares that have been beforehand deemed “too risky” and “poor investments for a high-rate atmosphere.”
However issues have been a bit totally different at this time… and that is as a result of we had the addition of two Fed officers saying that they had thought of the opportunity of 50-bps hikes. That, plus a second scorching inflation studying, appeared to place a chill on all of the shopping for.
Now, even with the end-of-day promoting, the S&P 500 continues to be sitting round 4,100, which is our essential assist/resistance stage.
The index’s means to remain above this land might probably imply the bull rally continues to be on. If it falls beneath, then we might see a major dip decrease.
As a result of the market reversed so immediately on the finish of the day, it is exhausting to know what the market sentiment might be going ahead. I am trying ahead to see what tomorrow brings.
Conclusion
This could possibly be a tough spherical for the bulls to win, but when they do, it could possibly be the beginning of a powerful leg larger.
And if the bears come out forward, we’re nonetheless defending ourselves with promote commerce triggers and by taking our beneficial properties whereas they’re nonetheless fairly worthwhile.
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Meredith Margrave
Chief Progress Strategist, StockNews
Editor, POWR Shares Below $10 E-newsletter
SPY shares closed at $407.26 on Friday, down $-1.02 (-0.25%). 12 months-to-date, SPY has gained 6.49%, versus a % rise within the benchmark S&P 500 index throughout the identical interval.
Concerning the Creator: Meredith Margrave
Meredith Margrave has been a famous monetary skilled and market commentator for the previous 20 years. She is at present the Editor of the POWR Progress and POWR Shares Below $10 newsletters. Be taught extra about Meredith’s background, together with hyperlinks to her most up-to-date articles.
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