The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Tired?
Futures traded down maybe 10 points in the premarket as we awaited the CPI (2.4% vs 2.4% est & 2.3% prior). That was a welcomed bullseye and the monthly data was soft. S&P 500 futures jumped right away and the Treasury curve came in 2-3 bips. The index opened up about 10 points and wiggled around until catching a bid in early trading, topping out around +20 points. The index drifted back to unch’d a couple times before falling down small in the afternoon. Capital flow was about normal at 97%.
The soft inflation data spurred the bulls into action, and that was justified. The inflation fear, especially due to the tariffs, appears misplaced. The probability of a Fed hike, which was already low, is now essentially zero. Bonds reacted accordingly as did Fed Funds futures. But the equity market rolled over around midday. Why?
There’s no obvious headline. Maybe the confusion concerning the announced US/China trade deal has something to do with it? Then again, maybe not. The market has been very comfortable with the lack of any details w/r/t trade agreements this year. The only think investors want to hear is that the tariffs are postponed and the deals are coming. So why should today be different?
The answer is that it shouldn’t. But the market dropped. So what’s going on? I think we’re simply dealing with a lack buyer enthusiasm. The bounce has been strong and essentially uninterrupted for two months. We’ve been lifting on fumes lately, without material news to fuel the ascent. Today’s CPI just didn’t have the muscle to keep investors from hitting bids.
I don’t think there’s anything significant under the hood right now. The rally took a breather. Maybe we need a big headline to re-inspire the bulls? Maybe we just need a little time.
I still think new all-time highs are around the corner.
See you tomorrow.
-Mike
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