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We have had two very massive developments since final week — two hotter-than-expected inflation reviews…and the S&P 500’s (SPY) response to them says quite a bit about the place we’re proper now when it comes to the continued bull/bear tug-o-war sport. 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 Underneath $10 e-newsletter).
Market Commentary
On Tuesday, we received the newest month-to-month Client Worth Index (CPI) report from the Bureau of Labor Statistics.
The report confirmed costs rose 0.5% month to month and are up 6.4% previously yr. Each of these numbers had been increased than most economists anticipated.
After buyers spent 2022 shopping for and panic promoting on inflation-related information, it appeared like a certain factor that we might get huge promoting… on each days, however Tuesday ended up flat (with the Nasdaq index really up), and all three main indices have virtually totally recovered their losses from this morning.
Then, this morning, we received the January Producer Worth Index (PPI) report. Once more, PPI confirmed costs rising (at a price of 0.7% month over month), which was sooner than the 0.4% price economists predicted.
It appeared like we had 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. Ultimately, 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 had been already considerably baked into market costs. In actual fact, on Tuesday, I wrote…
Everyone knows by this level that inflation just 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. Traders 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 successful this spherical of tug-o-war, and buyers are “threat on,” shopping for up shares that had been beforehand deemed “too unstable” and “poor investments for a high-rate surroundings.”
However issues had been a bit completely different at present… and that is as a result of we had the addition of two Fed officers saying they’d thought-about the potential for 50-bps hikes. That, plus a second sizzling 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 skill to remain above this land may doubtlessly imply the bull rally continues to be on. If it falls under, then we may see a big dip decrease.
As a result of the market reversed so all of the sudden on the finish of the day, it is arduous to know what the market sentiment will likely be going ahead. I am wanting ahead to see what tomorrow brings.
Conclusion
This might be a tough spherical for the bulls to win, but when they do, it might be the beginning of a powerful leg increased.
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.
What To Do Subsequent?
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Meredith Margrave
Chief Progress Strategist, StockNews
Editor, POWR Shares Underneath $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 Writer: Meredith Margrave
Meredith Margrave has been a famous monetary knowledgeable and market commentator for the previous twenty years. She is presently the Editor of the POWR Progress and POWR Shares Underneath $10 newsletters. Be taught extra about Meredith’s background, together with hyperlinks to her most up-to-date articles.
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