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We knew a week or two ago that today’s Consumer Price Index (CPI) report was going to be important — we’d already circled it on our calendars. And results were good this morning, better than expected, even: 10 basis-point (bps) drops across all major reads for October CPI were enough to set the pre-markets on fire, and they only went up from there.
The Dow closed +489 points, +1.43%, while the S&P 500 gained +1.91% on the day. The Nasdaq posted its best session since April, +326 points or +2.37%, while the small-cap Russell 2000 just made its best day in a year, +5.44%. This has helped catch the Russell up to its bigger-stock brethren over the past month of trading, between 2.50-4.00% — even higher off late-October lows for the year.
Part of the superlative bullishness today has to do not only with the idea that the Fed is done raising interest rates — in December, January and the foreseeable future — but that rate cuts could be on offer as soon as March 2024 (a roughly 30% chance of today). However, this pushes pretty hard against the narrative the Fed has been careful to lay out a long time now: “higher for longer.” In order for the Fed to change its mind on this fundamental point, it would likely be due to something in the economy we do not currently envisage.
Thus, if the slow-but-steady anti-inflation measures continue as they have for more than a year and a half now, a March rate cut from here looks like wishful thinking. Even a June cut would require a fairly drastic change of economic scenery — not that it can’t happen, but it doesn’t look terribly likely. Therefore, it’s very possible market participants are getting ahead of themselves, and this big market bid today — and month to date, for that matter — may prove a bit overbought from this vista.
In any case, Real Estate gained +5% while Utilities were +4%. All 11 S&P 500 sectors were up for the day. Intel (INTC - Free Report) and lululemon (LULU - Free Report) notched new 52-week highs today, while Microsoft (MSFT - Free Report) , Chipotle (CMG - Free Report) and Walmart (WMT - Free Report) — a day before the company reports earnings — hitting new all-time highs in today’s session. To say nothing of GPU giant NVIDIA (NVDA - Free Report) , which just tied a record with its 10th-straight higher trading day. This Magnificent Seven representative is now up nearly +250% from the first of the year.
Another reason it may be wise not to get too caught up in such vast bullishness is that tomorrow brings us the Producer Price Index (PPI), often seen as a forward indicator to future CPI. If results are not smoothly accommodative the way today’s CPI report was, it may be worth questioning whether this data overall is truly as strong as we are prone to believe these days.
Image: Bigstock
Markets Bask in Cool CPI, Speculate on Rate Cuts
We knew a week or two ago that today’s Consumer Price Index (CPI) report was going to be important — we’d already circled it on our calendars. And results were good this morning, better than expected, even: 10 basis-point (bps) drops across all major reads for October CPI were enough to set the pre-markets on fire, and they only went up from there.
The Dow closed +489 points, +1.43%, while the S&P 500 gained +1.91% on the day. The Nasdaq posted its best session since April, +326 points or +2.37%, while the small-cap Russell 2000 just made its best day in a year, +5.44%. This has helped catch the Russell up to its bigger-stock brethren over the past month of trading, between 2.50-4.00% — even higher off late-October lows for the year.
Part of the superlative bullishness today has to do not only with the idea that the Fed is done raising interest rates — in December, January and the foreseeable future — but that rate cuts could be on offer as soon as March 2024 (a roughly 30% chance of today). However, this pushes pretty hard against the narrative the Fed has been careful to lay out a long time now: “higher for longer.” In order for the Fed to change its mind on this fundamental point, it would likely be due to something in the economy we do not currently envisage.
Thus, if the slow-but-steady anti-inflation measures continue as they have for more than a year and a half now, a March rate cut from here looks like wishful thinking. Even a June cut would require a fairly drastic change of economic scenery — not that it can’t happen, but it doesn’t look terribly likely. Therefore, it’s very possible market participants are getting ahead of themselves, and this big market bid today — and month to date, for that matter — may prove a bit overbought from this vista.
In any case, Real Estate gained +5% while Utilities were +4%. All 11 S&P 500 sectors were up for the day. Intel (INTC - Free Report) and lululemon (LULU - Free Report) notched new 52-week highs today, while Microsoft (MSFT - Free Report) , Chipotle (CMG - Free Report) and Walmart (WMT - Free Report) — a day before the company reports earnings — hitting new all-time highs in today’s session. To say nothing of GPU giant NVIDIA (NVDA - Free Report) , which just tied a record with its 10th-straight higher trading day. This Magnificent Seven representative is now up nearly +250% from the first of the year.
Another reason it may be wise not to get too caught up in such vast bullishness is that tomorrow brings us the Producer Price Index (PPI), often seen as a forward indicator to future CPI. If results are not smoothly accommodative the way today’s CPI report was, it may be worth questioning whether this data overall is truly as strong as we are prone to believe these days.
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