Friends
The much-anticipated Consumer Price Index release this morning was like a nuclear bomb dropped on the market. Hope’s that inflation was beginning to moderate were quickly dispelled as the month to month and year over year numbers both came in hotter than expected. Add to that mix the University of Michigan Consumer Sentiment release which showed sentiment at the lowest reading ever (ever is a really long time by the way). Bonds sold off (rates higher) with the yield on 10-year Treasury Note pushing up to 3.15% (the yield curve from 2 years to 30 years is basically flat at this point). All of this was just too much for stocks as the market averages fell at the open and remained under pressure for the entire trading session.
For the day, by the close the Dow Jones Industrial Average was down 880 points to finish the day at 31,392. The S&P 500 was down 116 points to close at 3,900. The Nasdaq Composite Index was down 414 points to close at 11,340. Gold was up $22 to trade at $ 1,875 per ounce, while oil was down $.95 to trade at $120.56. The S&P closed today just about where it closed on May 20th which had been the lows for the year. So, another bear market rally has disappeared rather quickly.
With today’s hotter than expected inflation print, next week’s FOMC meeting becomes even more interesting. The Fed has telegraphed that we would see 50 basis point rate hikes in each of the next two meetings, next week’s and July’s, but after today’s inflation news many believe that the Fed may raise rates as much as 75 basis points next week. Fed Chair Powell likes to guide the markets with regards to Fed policy, so it would be very interesting if he goes off script next week and delivers a bigger rate hike than is already expected. Again, all of this is going to take some time to play out. That’s why we plan for moments like this. Let’s see how the Fed reacts next week. Stay tuned.
Have a great weekend everyone.
