Nervous Market Snaps Out of Its Bad Mood, But Can We Bank on More Good Vibes?

A nervous market rallied strongly on a mixed CPI report. Investors were relieved by lower-than-expected core CPI reading, although the headline number was higher than expected. Worries about inflation have been building and putting pressure on equities, but this report was good enough to help raise expectations for the Fed to cut rates sooner rather than later.

It was a very broad rally, with around 8,000 stocks gaining and only 1,600 declining. The Magnificent Seven MAGS led the charge with a gain of 3.6%, which helped lift the Nasdaq 100 QQQ by 2.2%. Only about 200 stocks hit new 12-month highs, but that is because the indexes and most stocks are still significantly below the highs they reached in December.

The primary issue now is whether the market can build on this momentum. One of the catalysts was strong earnings from the banking sector. The SPDR Select Financial ETF XLF jumped 2.6%, with more big banks reporting Thursday.

This was the first day of significant fourth-quarter earnings reports, and so far, it was a good showing. The fact that many stocks were oversold contributed to the big move.

There are a few economic reports on the agenda in the next couple of days, but the next big market-moving event will be on Monday when Donald Trump takes office. Although there is still little clarity about his economic priorities, there are very likely to be dozens of executive orders on the first day of office, which will have market implications.

Technically, the market is in good shape for some upside follow-through but the CPI report really wasn’t that fantastic. What really helped the market today was that the mood had become quite gloomy and was oversold.

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

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