Bounce Fails and Now Major Market Catalysts Are Piling Up
After another disappointing day, the market faces three key issues.
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It was another disappointing day for the market, as a rally on a mixed CPI report quickly faded and stocks trended lower for the rest of the day. Unlike on Tuesday, there wasn’t any strong rotational action to offset the technology weakness. There was some strength in retail names and Apple (AAPL) but the Magnificent Seven (MAGS) took a 2% hit and the Russell 2000 was down about 1%. Breadth was around 45% positive and there were more new highs than lows which is a function of the recent rotational action.
3 Key Issues
There are three key issues weighing on the market.
The first is uncertainty about the Iran situation. President Trump indicated the likelihood of renewed attacks, but there are still some efforts toward a settlement. Oil prices moved higher on the news.
The second issue is economic. While CPI was mostly in line, the headline number rose 4.2% and has averaged 4.5% over the past five years. Cumulative inflation is around 25%, which is why so many people are struggling with the cost of living. To make matters worse, real wages are falling. They may have increased some but they are not keeping pace with inflation. The Federal Reserve has failed miserably at hitting its 2% inflation target and the repercussions are building.
The third issue is the SpaceX IPO that is due to start trading on Friday. This is the sort of event that many market players view as a potential trigger for a major market turn. It is both psychological and financial. While the size of this IPO is small compared to its market capitalization, there will be billions of dollars of stock unlocked in the months ahead along with two huge IPOs from Anthropic and OpenAI. Fund flows are going to trigger large, chaotic moves.
SpaceX IPO Test
The SpaceX IPO will be an interesting test of the mood of the market. The IPO is oversubscribed so there will be plenty of buyers looking for entries, but how willing will they be to chase and how much flipping will there be by those who received an allocation? Will strong trading in SpaceX be viewed as a market positive or will it trigger more rotational action?
Technical Picture
Technically, the indices are rolling over on big volume. There have been some attempts at support but we are not seeing the strong closes that boosted the market in May. It is gloomy out there which has some of the contrarians looking for a bounce but I don’t see enough upside to try to catch a counter-trend bounce. The SpaceX IPO is a very uncertain event.
Have a good evening. I’ll see you tomorrow.
At the time of publication, DePorre had no positions in any securities mentioned.
