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Profit from the Pros By Kevin Matras Executive Vice President
Stocks End Higher After Fed Chair Powell Says Disinflationary Process Has Begun
Image: Bigstock
Stocks closed higher yesterday after a late day rally put the markets in the green.
Stocks opened lower, but turned positive after Fed Chair, Jerome Powell, said that the "disinflationary process...has begun." Traders took that as an acknowledgement that inflation indeed was easing, and that maybe the Fed won't have to raise rates as high as they had forecast.
But then the markets headed back down after he went on to say that "if we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have to do more and raise rates more than is priced in."
Then stocks headed back up after he commented that "we expect 2023 to be a year of significant declines in inflation."
Recent market action suggests traders are betting on inflation continuing to ease, and that the higher interest rates we've already seen will slow the economy enough to keep inflation on the decline without derailing the economy.
If we get a higher inflation report, that would likely disrupt that narrative. But for now, declining inflation has been the recent trend. And stocks are going up as a result.
In other news, earnings reports continue to roll in, and are mostly coming in better than expected. We have another 233 companies on deck to report today.
As for economic reports, today we'll get MBA Mortgage Applications, Wholesale Inventories, and the EIA Petroleum Status report.
Stocks are off to a great start this year. With inflation on the decline, economic forecasts improving, and all of the positive seasonal tendencies going for the market right now, 2023 is shaping up to be a strong year for the market.
See you tomorrow,
Kevin Matras
Executive Vice President, Zacks Investment Research
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