Inflation Worries Persist, But Signs of Technical Support Are Emerging

A rebound in worries about inflation has put pressure on the market for the past week, but signs of support emerged on Monday. The Dow Jones industrial average jumped 0.9%, and the Russell 2000 small-cap stocks finished with a gain of 0.2%.

The producer price index report, which lands at 8:30 a.m. ET today, and the consumer price index report on Wednesday, could upset the market again if they come in hot. So, it's premature to conclude that inflation worries have been put aside. But we are seeing signs of dip-buying. At the same time, bonds remain under pressure, with the 10-year Treasury Note yielding 4.8%, the highest level since October 2023.

Early Tuesday morning, we're seeing some rebound action following reports that the Trump Administration is working on a gradual approach to tariffs to use as a negotiating tool and avoid a sudden spike in inflationary pressures.

The uncertainty of Trump's economic policies is making it more difficult for the market to deal with hot data and clarity on what to expect appears elusive. Uncertainty prevents the market from fully discounting inflation concerns, so look to bonds as the best indicator of what is going on.

The market's attention will, however, quickly turn to earnings when JPMorgan Chase JPM, Goldman Sachs GS and others report on Wednesday morning. The reaction to these reports will set the tone for the market, but the reaction to the Magnificent Seven MAGS will determine where the market is headed next.

For now, we are seeing some stabilizing in the market, and we will see if that provides some comfort for stock pickers who have been slammed by the sudden inflation worries. Fundamentals haven't mattered recently, as selling is hitting from the top down.

There is still danger of more selling on inflation worries, but signs of support are developing.

At the time of publication, DePorre had no position in any security mentioned.