A slightly hotter-than-expected CPI report did little to move the market on Wednesday. It could have been a good excuse for some selling as it did nothing to shift the 40% possibility that the Fed may hike rates again on November 1.
The report ended up as nothing more than just a reminder that we will have to wait for more data before we can gain greater insight into how the economic situation might unfold.
The action was dull but well-mixed on Wednesday, with the Nasdaq 100 (QQQ) leading and Amazon (AMZN) hitting a new high for the year. Small-caps lagged, and that was reflected in breadth, which was around 3300 gainers to 5000 decliners. New 12-month lows moved up to nearly 300 names versus 90 new 12-month highs.
Small-caps have been struggling for a very long time, but most investors probably don't realize how long it has been. Currently, the ratio of the Russell 2000 small-cap index to the Russell 1000 large-cap index is at its lowest point in 22 years. There are several reasons for this, such as passive investing and the growth of ETFs, but it illustrates how an area of the market that favors aggressive speculation is offering very little opportunity right now.
PPI and retail sales numbers are to be released on Thursday, but we are stuck in slow and gloomy September seasonality, and even the CPI report isn't going to rouse traders right now. Stay patient and optimistic. I can assure you that the action will eventually change. The one great certainty of the stock market is that it is always changing.
Have a good evening. I'll see you tomorrow.