June 13, 2024
Good morning,
With the benefit of some time overnight to lend a very eventful Wednesday some perspective, it is evident that the market placed greater weight on the better-than-expected key inflation report (May Consumer Price data, CPI) in the morning than the afternoon Fed announcement (which had a hawkish lean to it). Both stocks and bonds retained a significant portion of their post-CPI rally even after the dot plot (FOMC Participants’ Assessments) projected only one rate cut by the end of the year (down from 3 cuts at the last meeting).
We’ve talked about flip-flopping data lately and despite yesterday’s excitement, 2024 rate pricing is almost exactly where it was at an equivalent time last month. Yields across the entire curve are less than a handful of basis points lower over the same period, while the S&P 500 Index (SPX) is 2% higher (thanks entirely to the Magnificent Pick-a-Number).
A few weeks back, we talked about how market tops unfold – a series of marginally higher highs where each new high is driven by fewer stocks than the previous high. One observation worth storing in our collective back pockets is that yesterday’s new high above 5,400 on the SPX was driven primarily by consolidating big tech names. Tesla, Apple, and Nvidia all rallied 2%+, fueled by blowout earnings from Oracle Corp, which soared 13%.
Our near-term all-clear market narrative remains intact. Early signs of market topping, like yesterday’s, gives our long-term, thunderheads on the horizon narrative, early credence as well.
Be well,
Mike
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