With the Fed in the Rear-View Mirror, Where Is the Market Headed Next?
Bulls may be in control for now, but near-term news catalysts are sparse.
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The market started off hot on Wednesday morning when the CPI report was softer than expected. It wasn't a huge downside surprise, but the market celebrated the fact that inflationary pressures are slowly eroding. Stocks blasted higher to start the day, with the mighty Apple AAPL leading once again.
Market players then anticipated that the CPI report would generate a more dovish tone from the Fed, but Jerome Powell stuck with the view that the Fed needs more data before it can determine what it will do next. What was particularly surprising was that the Fed indicated that it was likely to offer only one rate cut of a quarter point in 2024 when previously it indicated there would be three.
The market held up quite well despite Powell's hawkish tone, but things cooled off a little into the close. We actually had a close at the lower end of the intraday range for only the second time in nine sessions.
The Russell 2000 IWM was the winner for the day with a good rebound in small-caps of 1.6%, while the DJIA lagged with a small loss. Big-cap technology stocks continue to lead, with the QQQ pushing into new highs territory. Breadth was good, but what was most notable was a big surge in new highs to over 1,000 names.
So, where do we head from here?
The Fed was not nearly as dovish as hoped, so economic news will remain extremely important. There are PPI and weekly unemployment claims on Thursday, but there isn't much else of interest on the agenda until we start the second-quarter earnings season in a few weeks.
The indexes have upside momentum, and the market seems confident that rate cuts will eventually occur, although the timing is difficult to anticipate. The market's narrowness is a problem, but some rotation into secondary stocks would solve that problem.
The bulls have the edge, but are they going to be able to keep things running without more news flow?
Have a good evening. I'll see you Thursday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
