The Consumer and Economic Growth Are on Trial Thursday
As the market readies to call retail sales, Walmart and Costco to the stand, there's one concern that I can't seem to shake.
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It was a mixed day for the market Wednesday as CPI came in slightly better than expected. It was weak enough so that the Fed could still cut rates, but strong enough to indicate that the economy was not crashing.
Odds of a 0.5% rate cut at the next Fed meeting on September 18 fell to 35% from 53% Tuesday. A week ago, it was over 70%.
What is helping the market at this point is that recession fears have subsided while there is still a high level of confidence that the Fed will cut rates. It is a Goldilocks situation in which inflation is not too hot and economic growth is not too cold.
Economic growth will be under a microscope Thursday morning when retail sales are reported, and earnings from Walmart WMT and Costco COST are also on deck. Investors will be watching for comments about the strength of the consumer.
Technically, the indexes wrestled with overhead resistance at key levels but managed to attract some dip buyers to hold things steady. The question now is whether this is a pause in the uptrend that will refresh the bullish energy or a stalling out that will lead to a tumble.
There appears to be a fair amount of complacency that is helping the bulls short-term, but I can’t shake off my concern about the action as we move into the very well-known seasonal weakness. I’m not sure what possible catalyst we have that will keep things running to the upside, but the price action is still holding, and that is the most important issue.
I have been increasing my cash levels, but I’m not averse to doing some buying. I just need to find some charts that I like, and there aren’t many as we bounce into resistance.
Have a good evening. I’ll see you Thursday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
