Wednesday, April 10, 2024
It was an eventful trading day. That’s the way you say it.From this morning’s pre-market trading March consumer price index According to the report, the Dow Jones Industrial Average fell more than -500 points before the opening bell, losing -1.09% by the close of trading. The S&P 500 fell another -0.95% and the Nasdaq fell -0.84%. Today, the Russell 2000 actually fell off the table, at -2.52%. The small-cap index is down more than -5.3% from its high in late March, the worst of the four major indexes.
That said, today’s trade wasn’t as bad as I expected. If you look at today’s chart, there was no big move up or down when the bad news came on tape. Things stayed relatively within range. That’s not much consolation for market participants hoping to ride the stock rally, but at least the numbers didn’t keep getting worse. It also supports the idea that it was actually the high CPI today, and what the June rate cut meant, and nothing else that upset this humpday trade.
Keep in mind that this has been a historically strong market year-to-date. In the case of the Dow and S&P, they hit their 2024 closing high for the first time on February 22nd, and in late March, the S&P exceeded $5,250 for the first time in history. The Fed’s reiteration of three rate cuts this year in the latest dot plot after the Federal Open Market Committee (FOMC) meeting on March 20 seemed all but certain to start cutting rates mid-year. Well, calculus has gone sideways.
Not that the Fed wasn’t already concerned.inside Latest FOMC meeting minutesCoincidentally, this afternoon, Members were expressing concern that the decline in inflation is not accelerating. He also vowed not to cut interest rates until he has “further confidence” that inflation is heading back towards 2%. Geopolitical conflicts have contributed to high oil prices, and the price of a tank of gas has actually increased for Americans. The Fed experienced “uncertainty about the persistence of high inflation.”
No, there’s nothing wrong with worrying about this. But for now, reaching an agreement for fewer than three rate cuts is essentially the same as taking medicine. As far as Wall Street is concerned, June is informally off the table, and a July meeting is increasingly in doubt. It is not easy for the market to absorb these perceptions. Especially after coming off such a high level just a few weeks ago. The market rallied in March, but April seems to be for fools, at least for now.
Tomorrow brings new data to ponder.march Producer Price Index (PPI), CPI’s retail wholesale print will be published prior to the opening bell on Thursday. Here we see numbers much closer to, and even below, the 2% optimal rate: +1.6% year over year as of February. Perhaps here too, energy prices will explode based on the turmoil in the Middle East. But perhaps it will also serve as a reminder that inflation has fallen sharply since a few summers ago without falling into recession. And it might be worth keeping.
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