Interactive Brokers Traders Insight

Plans for big-ticket purchases remained depressed with elevated prices, steep borrowing costs and reduced credit availability weighing on ordering activity. Finally, Americans called the odds for recession likely while CEOs were more sanguine, sustaining odds of roughly 35%.

Market participants are pressing the pause button on Wall Street’s recent stock rally as they sift through a buffet of remarks from Fed speakers. Federal Reserve speakers yesterday emphasized that the current fed funds rate is restrictive and is likely to continue to support disinflation, but more evidence is needed that price pressures are easing in a sustainable manner before the central bank lowers rates.

On the good news front, CPI was indeed modestly market friendly. Stocks took the lower yields as a good sign

Markets are rallying with this morning’s weaker-than-expected economic data dampening concerns of a prolonged journey across the monetary policy bridge.

While lower costs of capital helped stocks last year and continue to do so, recent earnings calls point to the potential for lighter yields to signal trouble. As equities trade near record highs amidst rates that have drifted lower, the consideration of a worn-out consumer is pivotal.

The current state of the housing market remains a huge problem for 2%, as home values remain at all-time highs due to an undersupplied market and many homeowners who are locked in at 2% to 4% mortgages, constraining inventory and leading to sticky rents.

The Federal Reserve will have to wait even longer for evidence confirming that gains in fighting price pressures are durable before it turns accommodative with this morning's data showing higher-than-anticipated inflation.

The Fed's interest rate policy has been accused of not properly accounting for the amounts of fiscal stimulus that have been occurring in recent years, which could impact the current rally and future economic growth.

The economy seems to be doing just fine, with GDP around the 3% levels to which we had become accustomed, making it unclear why rate cuts are even necessary, particularly in the US.

The entrenched nature of inflation, including high wages, fierce services spending, increased input costs and supply chain issues, expectations for rate cuts are likely to fade as the potential for another Fed rate increase becomes more likely.

A weakening consumer likely leads to stagflation, with the credit card situation at small banks rising to the loftiest level in history, and a potential government shutdown serving a severe blow to what's left of consumer resilience.

As inflation reaches fresh '24 highs, rates are expected to continue their upward trend, making it a challenging environment for investors.