February 15, 2023
Good morning,
The all-important CPI number came in yesterday exactly as expected and it was expected to be a little strong. The interpretation by markets was “higher-for-longer” for the Fed’s tightening cycle. Two weeks ago, bond markets were betting a low probability of a May rate hike and an end to the hiking cycle. Now, a May hike is a lock, and June is better than 50/50. Rates continue to move higher and adjust to the no-landing argument cropping up in trader’s attitudes.
Last year when rates climbed, stocks declined. Not this year. Not yet anyway. The S&P 500 was flat yesterday on the strong inflation number and the usually rate sensitive NASDAQ composite actually closed up on the day. One of the biggest differences between a market in an uptrend and one in a downtrend is the way it handles news. The way the equity market handled yesterday’s stiff inflation number is a good reminder of the recent trend change for stocks.
See you Friday with some charts.
Be well,
Mike