Will CPI Be the Tipping Point for an Inconsistent Market?
Here's why Wednesday morning's inflation report is more important than usual.
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The PPI report released on Tuesday morning was not as hot as feared, and that helped the market bounce to start the day, but the bulls were unable to do much after a positive start. While breadth was positive due to some strength in financials, money rotated out of the Magnificent Seven MAGS, with the group losing about 1.4%. The biotechnology sector IBB was particularly poor, with many stocks in the group hitting new 12-month lows.
The lack of interest was likely caused by hesitancy to make big moves in front of the CPI report that is due out at 8.30 a.m. ET on Wednesday. The report is more important than usual because it could confirm the growing concerns about inflation or send a message the other hot data is just an aberration.
Bonds continue to trend lower, which is causing interest rates to hit multi-year highs. There are no signs yet that interest rates are topping, and that is why the market is acting so poorly. In the last few months of 2024, the market did not care about higher rates, but now they matter, and that means that good economic news is now negative.
The other issue that the market is dealing with is the uncertainty of what will happen when Trump takes office on Monday. There is going to be a flood of executive orders, and we will soon find out what will happen with tariffs.
Big banks report in the morning at the same time CPI is hitting, so we’ll have some news flow to shake things up. It is a very difficult trading market right now due to the inconsistency, and the CPI report has the potential to be a tipping point in either direction.
Have a good evening. I’ll see you Wednesday.
At the time of publication, TheStreet Pro Portfolio had no positions in any securities mentioned.
