There's Clearly an Appetite for More Speculative Investments
It was a solid day of gains without much of the euphoria that typically occurs at new highs.
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A lower-than-expected Core CPI report pushed the senior indexes to a new all-time high. Although there was steady buying all day on Wednesday, it was fairly quiet action with strong breadth but sedate volume. The most notable statistic was that over 1400 stocks hit new 12-month highs, which was largely due to continued momentum in smaller stocks.
The meme rally that started on Monday fizzled out quickly, and the number of stocks making moves of 10% or more was quite limited, given the action in the indexes. Buyers were busy, but the Magnificent Seven only had mild gains, and there didn’t appear to be much fear of missing out or short squeezes. It was just a solid day of gains without much of the euphoria that typically occurs at new highs.
Despite the cooler CPI report, Fed Fund Futures did not move much, and there is still quite a bit of uncertainty about potential rate cuts this year. The Fed is not going to make the mistake of another dovish pivot until it sees quite a bit more data.
We have some retail earnings reports coming up from Walmart WMT on Thursday, which will shift the focus back to the health of the consumer. There were some concerns about consumer strength after the Michigan sentiment report last week, but they seem to have been forgotten for now.
I continue to like the technical action in smaller stocks and am growing more optimistic that this may be a trend that may continue for a while. The best values in the market are smaller stocks that have been ignored for years, and the flurry of action in the meme stocks illustrates that there is an appetite for more speculative investments.
Have a good evening. I’ll see you Thursday.
At the time of publication, James "Rev Shark" had no position in the securities mentioned.
