On Tuesday, the DJIA and S&P 500 hit new highs once again, but the momentum was muted as there was some rotation out of growth, small-caps, and FATMAAN names. The lagging stocks have been catching up a bit recently, but it has not been a smooth ride. We have an illustration again in the early going as the Nasdaq 100 (QQQ) is underperforming as bonds drop and financials and oils rise. Bitcoin is also bouncing back after a little rest.
CPI numbers are due this morning and will shift the focus again to the inflation issue. The Fed is sticking with the argument that the rise in inflation is transitory, but there is increasing skepticism from the market. The surge in the Delta variant is slowing growth, and that is preventing faster growth, but a $3.5 trillion budget bill isn't the sort of thing that is going to help.
While there are plenty of macro issues in the headlines, the market action has been quite sedate as we work our way through peak Wall Street vacation season. There have been some good earnings reports that are creating movements, such as Upstart Holdings (UPST) and FuboTV (FUBO) , but the indices have not been moving much.
Market players are mostly focused on stock picking rather than market direction right now. The big issues like COVID, the infrastructure bill, and inflation are not producing big moves, but there is this ongoing rotational action that keeps occurring on a random basis that is creating some obstacles for traders that are trying to catch sustained movement.
My game plan is to continue to focus on some of the reactions to earnings reports that are hitting and taking advantage of low-volume drifting. The market is going to continue to trade quite thin until after Labor Day, so it's important to manage trades carefully and not be caught with too much exposure during low-volume volatility.
We have another mixed start on the way as market participants look ahead to the CPI reports that are due at 8.30 am ET.
