Stocks are looking to open sharply higher Thursday morning as inflation and interest-rate worries continue to dissipate. The negative reaction to the Fed and Chair Jerome Powell last week turned into a trap for bears that were convinced that the Fed's acknowledgment that inflation was building would be the catalyst for a major market correction.
The market did undergo a couple of days of weak action, but the bears could not build on the negative narrative, and now they are being squeezed and looking for long entries as the Nasdaq and S&P 500 hit new all-time highs.
Another issue that is helping to drive the market higher is that there has been a shift back into growth stock names, and the Russell index rebalancing is helping to drive some action in small-caps. It has been a better market for stock-picking, even though it is still choppy and inconsistent.
Market players will be looking at weekly unemployment claims, durable goods, and GDP numbers at 8.30 am ET. GDP is forecasted to come in at around 6.4% annualized as a result of the economic rebound from the pandemic. That will generate some interest, but the market seems content that the inflation issue is under control for now.
One of the easiest mistakes to make in the market is to constantly try to anticipate what can go wrong rather than focus on what can go right. The bearish spin on higher inflation was easy to anticipate, but the market has found a way to deal with it in the short term. Whether that will lead to problems down the road isn't an issue that we need to deal with right now.
The market is focused on what can go right as the economy gains steam and the fear of inflation diminishes. The bears are on the wrong side of the action again and are now being forced to reposition to deal with a market that is looking for new all-time highs.