The S&P 500 is not often down for five consecutive weeks, so one has to think this might be the week the market attempts a rebound. There’s a good chance of a bounce, but whether it happens is another question.
Mott Capital Management, LLC
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The cooler-than-expected CPI report initially pushed equities higher after the news, but once implied volatility reset, the rally fizzled, and choppy price action took over.
We could forget about inflation for now because more pressing matters are at hand—namely, the most important stock in the world, Nvidia, and its earnings report.
Today’s CPI came in much hotter than expected, and the impacts were felt throughout the bond market and the dollar complex.
With tightening liquidity, low implied correlations, and potential for a more hawkish Fed outlook, the upside for equities seems limited compared to the downside risks.
Despite some commentary on news networks suggesting rates aren’t rising due to inflation worries, ignoring the data is difficult.
It’s all about rates, the dollar, and inflation expectations. If economic data continues to surprise to the upside, rates could climb even higher.
If the Fed cannot cut rates as much as people expect due to persistent inflation and a relatively stable job market, we could see a bear steepener.
It looks like where the market heads between now and year-end will likely rest again in Nvidia’s hands.
