Wall Street found some relief today as cooling inflation encouraged investors to buy the dip in risk assets. However, despite softer CPI data, rate cut expectations for May and June actually declined.
✅ $NASDAQ(.IXIC)$ +1.2% (Tech leads rally) $Vanguard Mega Cap Growth ETF(MGK)$
$MGK
✅ $S&P 500(.SPX)$ : +0.5% (Despite ⅔ of stocks closing lower) 🔻 Dow Jones: -82 points (-0.2%).
📊 Market breadth was weak, as shown by: Invesco S&P 500 Equal Weight ETF: -0.5% Invesco S&P 500 High Beta ETF: +1.6% (Riskier stocks surged) Invesco S&P 500 Low Volatility ETF: -1.1% (Defensive stocks lagged)
1️⃣ Inflation Cools, But Fed Rate Cut Odds Drop
February CPI: +0.2% month-over-month (vs. 0.3% expected) Airline fares dropped 4%, skewing inflation data lower Core PCE inflation (Fed’s preferred gauge) may still rise
Inflation
Treasury yields rose despite soft inflation data…
CME FedWatch Tool: The Fed may not rush to cut rates if inflation remains sticky.
CME Fed
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Odds of May rate cut: 17.9% (down)
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Odds of June rate cut: 83.1% (down from 90%+)
2️⃣ Equity Valuations: Still No Fear of Recession
S&P 500 forward P/E ratio: 20.7x (even after selloff). This suggests no major concern over recession or U.S. losing its status as the top global market.
Historical Strength of U.S. Markets: Over the last 15 years, the S&P 500 has outperformed global stocks 78% of the time. Average outperformance: +3.6 percentage points. Nasdaq’s 5-year CAGR: 12.5% (consistent outperformance in disruptive innovation)
3️⃣ Momentum Shift: Risk Assets Surge
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High-beta stocks surged, led by $Tesla Motors(TSLA)$ , $Micron Solutions, Inc.(MICR)$ , $Palantir Technologies Inc.(PLTR)$ Vistra, and Nvidia.
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Short-covering and momentum chasing were key drivers. Nasdaq up 1.2%, but S&P’s gains were concentrated
Broad market weakness remains, but traders are rotating into beaten-down high-growth stocks.
4️⃣ What’s Next?
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Today’s Producer Price Index (PPI) will provide another inflation signal. Upcoming tariffs could impact future inflation data… Investors watching Fed’s next move carefully—will they hold rates longer? The market is bouncing, but with weak breadth, shifting Fed expectations, and policy uncertainty, expect more volatility ahead.
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This summary is for informational purposes only and does not constitute financial advice. Investors should conduct their own research before making investment decisions.
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