With all the volatility lately I am beginning to think Wall Street is in the elevator business where things are….. “up and down”. The Dow today opened lower on inflation fears but quickly reversed and moved higher thanks to leadership from tech and bank stocks. At the close the Dow was up 253 points to 24,893. Trading volume was heavy.
Economic data is coming hot and heavy and the key gauge to watch is inflation. The latest CPI reading came in a 0.5% which is above estimates and the fastest growth in several years. The core rate of inflation was also higher and now stands at an annual rate of 1.8%. The main driver behind the jump in core inflation was housing costs.
Retail sales were also reported and unlike inflation, retail sales missed estimates to the downside meaning the Q4 GDP growth rate is expected to be closer to 2.3% instead of 2.6%. Reasons for the weakness deal mostly with timing as sales of building materials and autos were pulled forward when people rushed to repair and replace hurricane and fire damaged homes and cars.
As is always the case, data points are often interpreted in different ways. Art “Colonel” Hogan at B. Riley said the data was the worst of both worlds. Meanwhile Nat “Silky” Sheets over at PGIM told Bloomberg that the data “gives me increased confidence that we are in a place where inflation is likely to be gradually rising more or less in line with the Federal Reserve’s forecast and consistent with an economy where we are seeing diminished slack, strengthening labor markets, solid growth.” Brian Wesbury at First Trust said the reports were disappointing but that long term growth prospects are still in place. Nesbit Thadwhacker at Mt. St Helen’s Securities was silent on the issue.
While the gurus debate the economic data the market today cast a clear “yes” vote for a solid economy and forward outlook.