/ January 16
Daily Briefing
*The stock market rallied following pleasing inflation data in the form of the December Consumer Price Index (CPI) report; the S&P 500 (+1.8%) traded above its 50-day moving average (5,957) at its session high before closing just shy of that key technical level; other major indices closed higher as well, with the Nasdaq outperforming following its +2.45% gain;
*Data in the CPI report featured a slight dip in the year-over-year rate for core CPI to 3.2% from 3.3%; annual inflation rose for a 3rd consecutive month to 2.9% in December 2024 from 2.7% in November, in line with market expectations; while not a rosy report by any means, we can assume that the market was pricing in worse numbers;
*SPY is now challenging the overhead resistance cluster sitting between $594 and $605 (50-DMA, M-Trend); note the 51/100 score on the Overbought / Oversold indicator, suggesting that conditions are now far from “Oversold”; an intermediary support level can be established at $578 (100-DMA) from where the last bounce occured, but meaningful support stands far below, at around $550 - $556 (S1, 200-DMA);
*The MACD signal has finally turned up in a more convincing manner, potentially signaling a bottom and a positive crossover; among sectors and factors, there are also several ETFs whose MACD signal has just crossed over bullishly - making such an outcome more likely as well for SPY;
*A market worried about inflation heating up again breathed a sigh of relief as December Core CPI came in 0.1% below expectations; these results were better than feared which, at first blush, shrouded the reality that the consumer inflation rate is still running well above the Fed's 2% target
*Broad-based buying interest in the stock market was also supported by solid earnings results from influential names in the financial sector, along with short-covering activity that drove additional buying in the bond market, as well;
*JPMorgan Chase (JPM, +1.8%), Goldman Sachs (GS, +5.3%), Wells Fargo (WFC, +5.2%), Citigroup (C, +5.0%), Blackrock (BLK, +5.2%), and Bank of New York Mellon (BK, +7.3%) were the standouts from the financial sector;
*As such, the broad market got a slight sentiment boost!
*Consumer Discretionary (XLY, +3.0%), communication services (XLC, +2.7%), and information technology (XLK, +2.2%) sectors were also top performers, reflecting rebound action in the mega cap space;
*The defensive-oriented consumer staples (XLP, -0.1%) and health care (XLV, +0.2%) sectors were at the bottom of the lineup among the 11 sectors;
*Note the XLK to SPY relative chart, hitting risk / reward lows; in such a case, tech’s rally is not surprising, but we are watching this chart for a potential breakdown;
*Looking ahead, investors will receive the following key economic data:
- December Retail Sales (0.5% exp.)
- Weekly Initial Claims (212K exp.)
*Yields declined on the day; the 10-yr yield, which is most sensitive to changes in inflation, settled 14 basis points lower at 4.65% and the 2-yr yield settled ten basis points lower at 4.26%; the 30-yr yield, which settled just below 5.00% the day before, declined 11 basis points to 4.88%;
*TLT rallied +1.72% but remains broadly uninvestible;