Reply To: Traders Market Weekly: Bears Squeezed in Bonds, Stocks and Currencies

#47405
Truman
Participant

Dow +833.61 at 33350.58, Nasdaq +596.63 at 10889.66, S&P +157.98 at 3906.62

There is a decidedly positive bias in the market today.

Market participants are reacting to the cooler-than-expected Consumer Price Index (CPI) for October, which showed a welcome moderation in the year-over-year changes for total CPI (to 7.7% from 8.2%) and core CPI (to 6.3% from 6.6%).

Price action in the currency and bond markets following the CPI report has also offered support to the stock market.

The 10-yr Treasury note yield is down 29 basis points to 3.86% and the 2-yr note yield is down 31 basis points to 4.32%.

The U.S. Dollar Index has plunged 1.7% to 108.65.

The CPI report for October reignited the narratives that peak inflation may have been reached and that the Fed may be apt to soften its approach going forward.

The latter point manifested itself in the fed funds futures market, which now sees an 85.4% probability of a 50-basis points rate hike in December (vs 56.8% yesterday) and a lower terminal rate of 4.75-5.00% by June (vs 5.00-5.25% yesterday).

Aside from supportive price action from the dollar and Treasuries, short-covering activity has compounded today’s gains along with some fear of missing out on further gains.

The broad rally effort brought the S&P 500 above its October high (3,905), which it’s fighting to defend currently. All 11 S&P 500 sectors are comfortably in the green led by real estate (+6.7%) and consumer discretionary (+6.6%). The consumer discretionary sector is bolstered by big moves in Amazon.com (AMZN 95.79, +9.65, +11.2%) and Tesla (TSLA 187.84, +10.22, +5.7%).

The consumer staples (+0.9%) and health care (+1.0%) sectors exhibit the slimmest gains.

Just about everything in the stock market, however, has risen with today’s CPI tide. Advancers lead decliners by a nearly 8-to-1 margin at the NYSE and a better than 4-to-1 margin at the Nasdaq. The Russell 3000 Growth Index is up 5.5% and the Russell 3000 Value Index is up 3.6%.