After a poor start to the new year on Tuesday, investors were looking for some economic news that would support some buying. There was economic news, but it wasn't very positive. Nonetheless, the buyers were active and delivered some gains, even though a downgrade of Microsoft (MSFT) weighed on the indexes.
To start the day, job openings remained quite strong. Employment is the main driver of inflationary pressures right now and is what is keeping the Fed quite hawkish. It doesn't much matter that consumer inflation is coming down if we continue to experience a very tight jobs market.
The market dipped on the data, but then bounced back and attracted some buyers. The minutes of the last Fed meeting hit in the afternoon, and the main headline was that no member anticipated any rate cuts in 2023. This isn't a big surprise, but the market is still hoping that the Fed will pivot to a more dovish stance sooner rather than later.
The Fed has not done a good job of forecasting. It was insistent for a long time that inflation was transitory, and now they are afraid that they will pivot too early. The likelihood is that a recession will hit, and the Fed will have no choice but to start cutting rates again.
In any event, the market bounced around on the news and ended up with some decent action. Breadth was quite good at around 6,300 gainers to 1,800 decliners, and new highs exceeded new lows. There are pockets of strength in biotechnology, China-related names, precious metals, and some financials. The small-cap, Russell 2000 fund (IWM) looked particularly good today and are likely benefiting from a "January Effect," when stock prices can rise during the month after a tax-related sales from the previous year.
We have some employment data later this week, but there isn't much else coming until earnings season starts in a couple of weeks.
Have a good evening. I'll see you tomorrow.
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