July 11, 2024
Good morning,
The big market event of the week is this morning’s June CPI at 8:30 am EDT. The next biggest event of the week was Jerome Powell’s 2-day testimony in front of Congress yesterday and Tuesday. His testimony did not move markets at all, which he probably counts as a success. After all, the Fed is really data dependent, so JP is currently in watch-and-react mode just like the rest of us. Swap traders are pricing in two Fed cuts in 2024, with a higher chance the first will come in September. At the close of his testimony yesterday, as Wall St. was gearing up for today’s all-important CPI print, he said the Fed doesn’t need inflation below 2% before cutting rates. He also said, “The job is not done on inflation.” Classic Jerome Powell.
Markets may not have been moved by Congressional testimony yesterday, but that is not to say it was another quiet day. Apple surprisingly announced they will ship 10% more new iPhones in 2024. That news lit up the megacap group (NVDA was up +2.7% on the day, for example) and drove the S&P 500 to fresh highs, gaining +1% on the day. All is well and good for the S&P 500, but the list of new highs continues to narrow. The equal-weighted S&P (SPW) remains 3.5% below its peak from late March, while the Russell 2000 is still way, way below its late -2021 high. I’ll spare you of mentioning more divergences.
Remember, a narrowing market is a key ingredient to a market topping process and tops may take months to complete. Just a hunch now, but it wouldn’t be surprising to see the narrowing rally continue right into the first rate cut this fall (likeliest Sept). It would be a classic “buy the rumor, sell the news” setup.
Let’s get through this morning’s CPI and tomorrow’s PPI. Wishing you a nice (cooler?) weekend.
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