Market Reacts to Rumors of Trump Firing Jerome Powell

A better-than-expected PPI report gave the indices a slight boost to start the day on Wednesday, but then talk that President Trump was about to fire Federal Reserve Chair Jerome Powell hit, driving stocks sharply lower. 

Trump denied the rumors and stated he had no plans to fire Powell at this time. Stocks completely recovered their intraday losses, continued climbing and finished at the day's highs.

When the smoke had cleared, breadth was solidly positive with over 7,000 gainers to around 2,900 decliners. The big winners were small-cap stocks, which rebounded 1% after lagging yesterday. The Magnificent Seven MAGS names were weak early in the day but finished with a gain of 0.2%

Many market players were worried about the very poor breadth on Tuesday, but the bears were unable to build on the weak action. While there was more talk about how tariffs are starting to cause an uptick in inflation, there isn’t any real concern yet. The bears have been wrong for so long about the economic data that they are unable to cause any real fear. The main fear is still fear of missing out.

There are a few more earnings reports this week with Netflix NFLX after the close on Thursday being of the most interest. There will also be some retail sales data, consumer sentiment numbers and housing starts reports which may have some influence, but the big catalysts hit next week when more major earnings will roll in.

Technically, the indices are hovering close to all-time highs, and the question is whether there will be deeper pullbacks as it consolidates recent gains. There appears to be some strong support, and the sell-the-news energy that developed on Tuesday was unable to gain any traction.

The bulls continue to be in control of the market and have fended off a couple of bearish attempts.

Have a good evening. I’ll see you tomorrow.

At the time of publication, DePorre had no positions in any securities mentioned.