Negative Market Headlines Are Missing the Most Important Point
The economic data keeps coming in better than expected and dip buyers are sidelined.
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A lower-than-expected CPI report and positive progress on trade negotiations with China generated a sell-the-news reaction at the market open on Wednesday. Dip buyers quickly showed up and pushed the indices back into the green, but it will be interesting to see if there is another wave of selling later in the day.
Once again, the economic bears were wrong about the data, with inflation coming in cooler than expected. The predictions of how tariffs would harm the economy have been consistently wrong, but the pessimists are not giving up.
The headline on Reuters was "U.S. CPI Rises 0.1% in May; Inflation to Surge Due to Tariffs. Gasoline prices helped keep May's CPI increase modest, but inflation is expected to accelerate later this year due to import tariffs. Data quality concerns loom as BLS faces staffing challenges and cuts."
That sounds quite negative, but it misses the most important point, which is that the CPI was lower than expected and continues the trend of better-than-expected data.
At some point, there will be some disappointing economic data, and there will be a sharp market response, but Wednesday was not the day. Ironically, many investors have been hoping for a negative response because they are growing tired of chasing this market higher. There is strong interest in buying a dip, but it is so strong that no sizable dips are developing.
I made a few tactical sales on Wednesday morning in some names where I have large positions that are hitting new highs, like BridgeBio Pharmaceuticals BBIO and AST Spacemobile ASTS, but in both cases, I will increase my positions when I find new entry points.
One name I added to today was uniQure QURE. The stock was very volatile recently due to concerns about gene therapy and the new leadership at the FDA. QURE has programs for conditions like hemophilia B, Huntington's disease, and refractory temporal lobe epilepsy. Analysts are very bullish on the stock, with target prices ranging from $70 to $24, an average of $40. The chart is developing well and is testing overhead in the $17 to $18 range.
I continue the hunt for new buys, but unless you are willing to chase and buy extended charts, it is very challenging.
At the time of publication, DePorre was long BBIO, ASTS and QURE.
