Stocks reclaimed some of the recent losses Tuesday, but it wasn't smooth sailing. Prices were up right out the gate in reaction to the February Consumer Price Index coming in on target, meaning it was the lowest year-over-year increase since September of 2021. Prices rose further; within a couple hours the indices had gains of over 2%. But the excitement halted, the gains were being given back quickly in the second half of the day as if the early eager buyers were just as eager to lock in their fresh gains. There was a little feeling of defeat among the bulls as the day's gains dwindled coming into the last hour of trading, but suddenly the winds changed, and prices spiked in the last trading hour.
Just a reminder, this is Thomas Crowley (TommyIV) filling in for Tom. Tom and I have known each other for a really long time so I had no problem taking his place the last couple days. I write the TSP Talk Weekly Wrap Up which is published on the TSP Talk blog every Saturday, and some of you may know me from my premium service The Last Look Report where we like to watch the AutoTracker very closely.
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The Consumer Price Index (CPI) came in 6.0% higher than the previous February. This is still a high increase considering the Federal Reserve's goal is 2% inflation. But the CPI is trending down, falling from the 6.4% in January from the previous year, but maybe most importantly it came in on target with expectations. There were no surprises and the market loves that.
The CPI report nearly solidified a 25bp rate hike by the FOMC in next week's meeting. The current probability of a 25bp rate hike is currently around 80% and the probability of no rate hike next week is currently 20%. Last week (before the bank failures) the probability of a 25bp rate hike was just 30%, while the probably of 50bp rate hike was 70%; nobody imagined no rate cut would be on the table.
The market also liked that there was no more big news coming out the latest bank insolvencies. The emergency measures (bail outs) regulators took to contain a potential cascade of bank runs has worked.. for now. This has bought them some time to plan their next move to stabilize the banking system so the FOMC can comfortably get back to fighting inflation.
Financial stocks had taken a beating in the previous days, so with the worst not materializing, dip buyers jumped into bank stocks eager to get them at a bargain price. But as the day went on those stocks gave up a large portion of the early gains and some even moved negative. Prices are still oscillating from the latest spike in volatility but the late weakness should keep our ears up. The bank rating service Moody's Investors Service changed its outlook on the entire banking system from stable to negative. This could cut credit ratings for the sectors which would further increase borrowing costs for banks.
Today investors get a view of the Producer Price Index, another measure for inflation but taken less into account than the CPI. After that it is more or less a waiting game until the FOMC meeting with lingering anticipation for another bank failure.
Admin Notes:
I'll be gone: Next week could be tricky for me as I have been called for jury duty. Because the courts are 90 miles away from where I live, and I don't know how long I might have to be there, I made reservations at a hotel and decided to stay there a few days either way, just in case. The problem comes if I do have to serve on a jury starting on Tuesday (thought it was Monday). I will really be hampered during the day, not only because I won't be able to watch the market, but I may not be able to send alerts if any of our services require it. That would include TSP Talk Plus, RevShark, and Intrepid's services. And of course if there is a trial of any length of time, it's a bigger problem and I will have to figure something out.
TommyIV, who writes our weekly Wrap Up, may fill in for a day or two writing my daily commentary, but it is not likely that he will be able to send alerts as he works on his Last Look reports around that same time. I can only hope for the best.
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The CPI report nearly solidified a 25bp rate hike by the FOMC in next week's meeting. The current probability of a 25bp rate hike is currently around 80% and the probability of no rate hike next week is currently 20%. Last week (before the bank failures) the probability of a 25bp rate hike was just 30%, while the probably of 50bp rate hike was 70%; nobody imagined no rate cut would be on the table.
The market also liked that there was no more big news coming out the latest bank insolvencies. The emergency measures (bail outs) regulators took to contain a potential cascade of bank runs has worked.. for now. This has bought them some time to plan their next move to stabilize the banking system so the FOMC can comfortably get back to fighting inflation.
Financial stocks had taken a beating in the previous days, so with the worst not materializing, dip buyers jumped into bank stocks eager to get them at a bargain price. But as the day went on those stocks gave up a large portion of the early gains and some even moved negative. Prices are still oscillating from the latest spike in volatility but the late weakness should keep our ears up. The bank rating service Moody's Investors Service changed its outlook on the entire banking system from stable to negative. This could cut credit ratings for the sectors which would further increase borrowing costs for banks.
Today investors get a view of the Producer Price Index, another measure for inflation but taken less into account than the CPI. After that it is more or less a waiting game until the FOMC meeting with lingering anticipation for another bank failure.
Admin Notes:
I'll be gone: Next week could be tricky for me as I have been called for jury duty. Because the courts are 90 miles away from where I live, and I don't know how long I might have to be there, I made reservations at a hotel and decided to stay there a few days either way, just in case. The problem comes if I do have to serve on a jury starting on Tuesday (thought it was Monday). I will really be hampered during the day, not only because I won't be able to watch the market, but I may not be able to send alerts if any of our services require it. That would include TSP Talk Plus, RevShark, and Intrepid's services. And of course if there is a trial of any length of time, it's a bigger problem and I will have to figure something out.
TommyIV, who writes our weekly Wrap Up, may fill in for a day or two writing my daily commentary, but it is not likely that he will be able to send alerts as he works on his Last Look reports around that same time. I can only hope for the best.
TSP Talk March Madness Contest! It's that time of year again. Free Contest with Prizes for winners.
Join now or,click here for more information.
The S&P 500 (C-fund) gapped up Tuesday and despite hitting a rock mid-day trading, was able the erase the losses of Friday and Monday. The index now sits where Thursday's sell-off closed, but the high of the day was limited by the 200-day Simple Move Average. This was great action for those who jumped into stocks within the last couple days or just some relief to the damage down to those who have been holding for some time. Above the 200-day MA there is room for gains before testing the web of moving averages weaving around the 4000 mark, but its worth caution to those who are thinking of chasing. The market is still sensitive to the seemingly fragile bank situation. The C-fund added 1.71% for the day.
The DWCPF (S-fund) produced a gain today, some relief after a six day stretch that accumulated to 9.24% in losses. The index did not match the S&P 500 in returning to the previous Thursday's close. DWCPF couldn't reach the Friday open which is the bottom of the open gap left open from that sell-off. However, the S-fund did outperform the C-fund with a 1.75% gain on the day.
The EFA (I-fund) managed to jump back into a trading channel, which has been trending down since the beginning of February. Like the DWCPF but unlike the S&P 500, EFA has yet to reclaim the losses of Friday and now much close above its 50-day EMA to do so, a technical challenge the other two index charts don't face. The I-fund lagged the C and S-fund for the day with a sub 1% gain. The I-fund added 0.87% for the day but still holds the best return of 2023 among the TSP funds at 4.71%.
As stocks rebounded, BND (bonds / F-fund) pulled back. The gap from Monday was closed today and the ETF closed near the highs of Friday's rally in bonds. With a couple days without more bank failures, investors are poking their heads out of the safety of less volatile assets and took a step back into risky assets like stocks. The F-fund lagged the TSP funds yesterday with a 0.66% loss.
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Thanks so much for reading. We'll see you back here tomorrow.
<!--new line --> Thomas A Crowley (TommyIV), filling in for Tom Crowley
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