One Day Wonder?
Markets signal Stability!
KR Opinion
After weeks of predictably climbing, the markets finally threw us a twist with a notable dip following the latest CPI report, injecting a bit of zest into what had been a rather flat trading landscape. Before this bit of excitement, the market had been as steady and uneventful as a quiet day at home, with volatility at its lowest in quite a while, hinting at some potential movement, which indeed materialized as a slight downturn.
Previously, I've playfully suggested that when volatility seems to be on holiday, it often dreams of a slight downturn. True to predictions, the CPI release acted as a wake-up call. However, in a surprising turn of events, the market quickly dusted itself off, with the S&P 500 futures showing resilience on Wednesday. Despite a few murmurs from the Fed, the market mood remained quite steady, supported once again by the 'buy the dip' enthusiasts.
I mentioned yesterday that if the S&P futures could confidently step over the 5015 mark, we might see a return to stability, and it appears the market took that as a sign to straighten up. Our database enjoyed a small victory as the bullish percentage reclaimed its position above the 42% mark.
This period of low volatility has led to market patterns becoming a bit too close for comfort, resulting in some dramatic trading decisions akin to a mild plot twist in an otherwise predictable story. I'll explore this further in the WaveTech database overview.
As the week progresses, we're observing earnings from the 'supporting cast' of mid-cap and small-cap companies, which, while interesting, don't tend to have a major impact on the overall market sentiment, still largely influenced by the ongoing inflation saga.
On the currency front, the dollar is showing some strength, partly fueled by speculative chatter about Japan's monetary policy. Should the yen push past 154 against the dollar, we could be in for an interesting ride toward 160 or even 163 – I'll delve into this more in a later section.
Bitcoin, always keen to grab headlines, has impressively surged past $52,000, suggesting a shift in investment focus that's definitely worth watching. More details on this will follow.
As we look to Thursday, we're expecting the usual data releases, but none are anticipated to shake the market significantly. The overall sentiment remains optimistic, buoyed by a bullish outlook. Despite the setback on Tuesday, the vision of the S&P surpassing 5100 is still within sight, albeit with slightly tempered expectations.
Looking Back on Wednesday Action
The stock market bounced back with style after a brief stumble, courtesy of the latest CPI data. Leading the pack, the Russell 2000 showed off with a 2.4% increase, brushing off yesterday's 4.0% tumble like it was just a bit of dust.
The S&P 500 wasn't far behind, ending the day at a neat 5,000 with a 1.0% uplift. There was a moment when it flirted with the idea of dipping below its previous close but decided against it, sparking a shopping spree among investors instead.
The backdrop to this shopping spree was a soothing drop in interest rates and a growing cheer for potential rate cuts. The yields on 2-year and 10-year notes decided to take a little dive, dropping to 4.58% and 4.27%, respectively, much to the market's delight.
While the day was quiet on the U.S. economic front, the Treasury market got a little pep in its step from a revision in the December PPI, which showed a bit more deflation than initially thought. Chicago Fed President Goolsbee, playing the role of market cheerleader (despite not having a vote in the FOMC), suggested the Fed might consider rate cuts before inflation hits the 2.0% target, stirring up some optimism.
The S&P 500 sectors mostly partied in the green, with industrials leading the dance with a 1.7% jump, thanks in no small part to Uber. The ride-hailing giant zoomed 14.7% higher after announcing a $7 billion treat for its shareholders in the form of a buyback program. Uber's joy was contagious, with Lyft also leaping 35.1% after sharing some pleasing earnings and a bright outlook, despite a little mix-up in their announcements.
However, not everyone was invited to the party. Consumer staples and energy sectors were the wallflowers, dipping slightly. Kraft Heinz felt a bit under the weather with a 5.5% drop following its earnings reveal, and the energy sector mirrored the day's crude oil journey, which took a 1.6% slide after inventory data showed a significant increase.
In a nutshell, the market had a day full of drama, recovery, and a bit of humor, proving once again that it's anything but boring.
Economic Releases for Thursday, February 15, 2024
08:30 ET: Initial Claims
For: 02/10 | Trading Impact: High | KR Forecast Feb 15: 224K | KR Forecast Feb 15 Cons: 221K | Prior: 218K
08:30 ET: Continuing Claims
For: 02/03 | Trading Impact: High | KR Forecast Feb 15: NA | KR Forecast Feb 15 Cons: NA | Prior: 1871K
08:30 ET: Retail Sales
For: Jan | Trading Impact: High | KR Forecast Feb 15: -0.1% | KR Forecast Feb 15 Cons: -0.2% | Prior: 0.6%
08:30 ET: Retail Sales ex-auto
For: Jan | Trading Impact: High | KR Forecast Feb 15: 0.2% | KR Forecast Feb 15 Cons: 0.1% | Prior: 0.4%
09:15 ET: Industrial Production
For: Jan | Trading Impact: Medium | KR Forecast Feb 15: 0.3% | KR Forecast Feb 15 Cons: 0.4% | Prior: 0.1%
09:15 ET: Capacity Utilization
For: Jan | Trading Impact: Medium | KR Forecast Feb 15: 78.8% | KR Forecast Feb 15 Cons: 78.9% | Prior: 78.6%
WaveTech Database
