The S&P 500 market experienced a retreat due to pre-PPI uncertainty, offering a swing entry point at the initial flush to 5,825 support. The UoM consumer data further supported buyers, satisfying clients. The intraday benefits were seen with a bullish focus on expected SPY and IWM leaders, favoring Nasdaq to lag behind. The PPI data would add a spin to the market, indicating a different direction.
The slight increase in CPI on Thursday hinted at conflicting PPI data, expected to be tame. Rate cut odds retreated, with only a 15% chance of one more 25bp cut this year. The expectation of higher growth and yields suggests inflation may rise in the future, despite the current tame PPI data. This could impact market trends and investor behavior.
Discussions with clients prior to the CPI data focused on raw materials and energy, leading to a greater risk appetite in the market. However, the UoM consumer data displayed below-expectations consumer confidence, supporting the soft landing thesis. The anticipation of rate cuts ahead, albeit fewer than expected in August, is crucial for stock market gains. This historical trend suggests that the period before a recession, when a soft landing is achieved, yields the greatest gains.
While there may be fears of a recession, the outlook is optimistic with no expectations of one in the near future, not even in early 2025. Bostic’s recent comments about potential rate cut skips align with the interpretation of yields reflecting incoming data. Despite high unemployment claims, some of which may be weather-related, the overall market sentiment remains positive. The data suggests a need to monitor economic indicators and adjust strategies accordingly.
Overall, the market is navigating uncertainties and data changes, adjusting to evolving trends and expectations. The PPI data will play a significant role in shaping future market movements and investor sentiment. It is essential for investors to stay informed and adapt their strategies to effectively navigate market fluctuations and capitalize on potential opportunities. By staying proactive and informed, investors can position themselves for success in a dynamic and ever-changing market environment.
