Investors had been very optimistic about consumer price index report and the market has run up quite a bit, but the number wasn't as good as many had hoped for this morning. This created a little sell-the-news response as the opening print was the early high. After going negative for a while, the S&P 500 fund (SPY) has bounced back to the opening levels, but the problem for the bulls now is that there isn't a surge in fear-of-missing-out that they hoped would keep the motor running.
Now that the report is out, I'm ramping up my stock picking a bit as we head into earnings season, but I continue to carry high levels of cash. Some of the names on my screen that are looking pretty good include Beauty Health (SKIN) , Actinium Pharmaceuticals (ATNM) , Beyond Air Inc. (XAIR) , SunCoke Energy Inc. (SXC) , and Genius Sports Ltd. (GENI) .
As for the indexes, the S&P 500 has come very close to testing overhead at 3984, which is the 200-day simple moving average, but we will need to regroup and try again. Technical conditions are somewhat extended, and plenty of shorts that covered Wednesday are looking to reload again now.
What has been most notable about the CPI report is the headlines in the media about how it is a near certainty that the Fed will raise rates by a quarter of a percentage point at its next meeting on Feb. 1. That was already the case. The odds of a quarter percentage-point hike were at 80%, even before the CPI report, so nothing changed. I guess the media is trying to create a little drama with this spin, but if you understand that nothing much has changed, then the placid price action makes more sense.
Currently, expectations are that the Fed will hike rates by a quarter percentage point three more times this year. The economic news that we see in the months ahead is going to impact that schedule and will determine what the market does.
Be aware that Fed members are unlikely to celebrate over the CPI numbers. While they are signaling a quarter percentage point hike at the next meeting, they will not be declaring victory or hinting at a pivot any time soon. We still have major issues with labor-related inflation and economic slowing that will impact things.
Now that CPI is out of the way, I'm hopeful that the focus will shift away from index volatility to stock picking.
(Please note that due to factors including low market capitalization and/or insufficient public float, we consider some of the stocks above to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.)
