CPI Update Erases Any Doubt on Fed

A lower-than-expected CPI report triggered steady buying on Friday. 

The S&P 500 (SPY) , Nasdaq, Nasdaq 100 (QQQ)  and Magnificent Seven closed at new all-time highs. The Russell 2000 small-cap index (IWM)  gained 1.37%, 64% of stocks were positive and there were over 220 new highs. Although there was some late selling pressure, it can be summed up as very bullish action.

Recent concerns about regional bank lending and a trade war were forgotten as the soft CPI report removed any doubts about a dovish Fed. There are 97% odds of a Fed cut next week and 92% odds of an additional quarter-point cut on December 10.

Along with the Fed interest rate policy decision on Wednesday, there will be a flood of earnings reports with Apple (AAPL) , Alphabet (GOOGL) , Amazon (AMZN) , Microsoft (MSFT)  and Meta (META)  all set to report. Also, President Trump is scheduled to meet with Chairman XI of China, and there is some optimism about progress on a trade deal.

Earnings have generally been quite good, but Tesla (TSLA)  and IBM  (IBM)  had to battle back after initially selling off on their reports. Expectations will be high, but if there is some sell-the-news action, it is very likely that dip buyers will be ready to pounce.

Increased volatility in the last two weeks has created some technical weakness, especially for growth stocks and speculative names, but the market has shrugged it off, and there is the smell of FOMO in the air once again.

The bears had a good opportunity to gain some traction after sharp selling, but they were unable to sustain the pressure. There were four ugly days of selling in the last 12 sessions, but the market rebounded the next day in each case. It is tough to be bearish when there is that level of resilience.

We have a very eventful week coming up, and it should offer some excellent opportunities for aggressive traders.

Have a great weekend.

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