The much-anticipated August CPI report came in a little hotter than expected, but the market reaction has been to fall asleep. It is very dull and dreary out there with little movement. Breadth is running about 3,000 gainers to 5,000 decliners, with Apple (AAPL) struggling once again.
The CPI didn't cause any change in expectations about the Fed. It is still a near certainty that there will not be a hike at the meeting next week, and there still is about a 40% chance of a hike in November. The Fed has little choice but to sit and wait to see if the lag effect of all its prior hikes will start to have a greater impact.
I continue to be puzzled by the disconnect between experts who are predicting that a soft economic landing is likely and individual consumers who say the economy is poor. According to a CBS poll, two-thirds of Americans describe the economy as "bad," and 70% say their paychecks aren't keeping up with rising prices.
According to Eric Wallerstein of the Wall Street Journal, real wages fell 0.5% in August. Bloomberg also has a story that states that almost half of affluent investors say inflation is hurting their retirement plans.
The anecdotal evidence of economic problems continues to pile up, but strategists at places such as Goldman are now saying that the chances of a substantial economic slowdown have decreased. The market will eventually tell us who is right, but I don't ever recall the disconnect between the pros and the average person being so wide.
For now, we have to sit and wait for the market to figure it out. The action on my screens is some of the slowest I've seen all year, with a very short list of stocks moving up on increased volume. It isn't bad action, but it isn't lively, and it is not attracting much interest.
Maybe we'll see a little "don't short a dull market" action later today, but this market is stuck in the muck right now.
