Market Commentary

The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.

Big turn.

Sentiment just flipped into excited territory. Premarket futures implied about 10 points of upside but cool CPI data sparked a 50-plus point jump in futures. Good earnings and guidance from the reporting banks further emboldened the bulls. The index opened about +70 points and wandered around somewhat during the morning trading. From lunch through to the close, the index rose steadily and printed intraday highs in the final hour of the session. Yields fell significantly across the Treasury curve and capital flow was only slightly elevated (106%).

Let’s look at the CPI data:

• CPI MoM (0.4% vs 0.4% est & 0.3% prior)
• CPI Ex Food and Energy MoM (0.2% vs 0.3% est & 0.3% prior)
• CPI YoY (2.9% vs 2.9% est & 2.7% prior)
• CPI Ex Food and Energy YoY (3.2% vs 3.3% est & 3.3% prior)
• CPI Index NSA (315.605 vs 315.616 est & 315.493 prior)
• CPI Core Index SA (323.383 vs 323.4 est & 322.657 prior)

There’s a lot here but the key is that the ex food and energy CPI surprised to the downside. Given PPI’s cool surprise yesterday, the inflation boogie man is no longer a worry. Concerns about Fed hikes are gone. We can focus on earnings season and a healthy economy for a while.

Here’s the S&P 500 results so far:

9 S&P 500 stocks reported

• 8 beat EPS estimates, 1 missed
• 8 stocks rose, 1 fell
• 6% avg
• 6.5% median

Beta-adjusted:

• 8 stocks outperformed, 1 underperformed
• 5.1% avg
• 4.4% median

We can’t draw a conclusion about the season but we can see the excitement. I don’t know whether the rest of the companies will inspire the longs but this first small batch of companies set the tone. We were heading into earnings season with questions and a lack of enthusiasm. Attitudes just shifted and investors are looking forward to the next results with optimism.

Obviously expectations can quickly outpace reality and we could experience too much hype as we go…

But as of right now, we are moving from feeling blah about earnings season and the macro environment to feeling good.

That process will take multiple sessions, at least, before there’s a risk of the index being way out over its skis.

So buckle up because it looks like we’re on a mission to print new all-time highs.

See you tomorrow.

-Mike

IMPORTANT INFORMATION

This is general educational information and market commentary and is intended for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction.

All market and economic data herein is as of the date hereof and sourced from Bloomberg unless otherwise stated. The information is subject to change without notice and we have no obligation to update you.

This general market commentary is intended for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The views and opinions expressed constitute the author(s) judgment based on current market conditions, are subject to change without notice, and may differ from those expressed by other employees of Visdom Investment Group LLC ("Visdom") and Visdom. Past performance and any forward-looking statements are not guarantees of future results. It is not possible to invest directly in an index.

We believe the information contained in this material to be reliable and have sought to take reasonable care in its preparation; however, we do not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. Any securities referenced are shown for illustrative purposes only, and are not intended as a recommendation or endorsement by Visdom or by the author(s) in this context. The information presented is not intended to be making value judgments on the preferred outcome of any government decision. This information does not constitute Visdom research, nor should it be considered a recommendation of a particular investment strategy or an offer or solicitation for the purchase or sale of any financial instrument. Investing involves market risk, including the possible loss of principal. You should speak to your financial advisor before making any investment decisions. Visdom and its affiliates do not provide legal, tax or account advice so you should seek professional guidance if you have questions.