A Hot PPI Number Can’t Stop the Bulls
Investors shrugged off the news of a hotter-than-expected PPI report.
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A hotter-than-expected PPI report slowed down the market on Thursday, but investors shrugged off the news and the S&P 500 closed nearly unchanged. There was some rotational action of the Russell 2000 Small Cap Index IWM after a couple of days of outperformance, but the money moved into the "safety" of the mega-cap Magnificent Seven MAGS, which gained about 0.6%.
The bears were excited about the hotter PPI, but fed fund futures still indicate a 92% chance of a quarter-point rate cut at the next Fed meeting on September 17. Bonds weakened as there was some increase in interest rates, but this news was not sufficient to spook the bulls that have been cruising along very smoothly despite a few signs of inflationary pressure and some economic slowing.
The bullish economic view is that even if there is some inflation due to tariffs, it will be short-lived and will be offset to a great degree by increased economic activity. The view is that the bears have overstated the negative impact of Trump administration policies, and unless there is some major inflationary news before September 17, the Fed is going to boost the economy with a rate cut.
Technically, the resilience of the market in the face of bad news is impressive. Breadth was solidly negative with 7,200 declining stocks to just 2,800 advancers, but there still were over 400 new 12-month highs as there continues to be pockets of speculative interest. Opendoor Technologies OPEN, for example, jumped 23% as meme traders came back for more action.
There is more data on Friday with retail sales and Michigan Consumer Sentiment being of particular interest. The fact that the market handles the hot PPI number so well is bullish.
At the time of publication, DePorre had no positions in any securities mentioned.
