Interest rates moved higher, gasoline hit new record highs, and Walmart (WMT) dropped over 11% on a very poor earnings report and reduced guidance. Retail sales came in better than expected, but part of that is due to higher inflation, rather than increased demand.
Despite the negatives, stocks moved solidly higher on breadth of better than four-to-one positive. The primary catalyst was a parade of Fed leaders who made it quite clear that they have the resolve to bring down soaring inflation.
A strong economy and very low levels of unemployment are making it easier for the Fed to take a hawkish posture, but the big unknown out there is whether a persistent level of hawkishness will eventually take a toll on the economy and cause a bumpy landing or a recession.
For now, the market gave the Fed a vote of confidence and decided to put some cash to work. It is not enough of a technical follow-through to produce a new confirmed uptrend, but the momentum is heading in the right direction. What will determine the health of this new fledgling uptrend is how it handles a pullback. If support levels are strong, then the dip buyers will be aggressive and help to keep this run going.
This is still just a bear market bounce, but that doesn't mean it can't run for a while. It isn't to put cash to work in this sort of action, and that is a big part of the reason that it stays strong. It creates a climb-the-wall-of-worry action, and that results in underinvested bulls incrementally putting more cash to work when the market doesn't suddenly drop.
The bulls have the advantage, but they will need to work hard to keep it.
Have a good evening. I'll see you tomorrow.