05|17|2022

Opposite Day! | May 13, 2022

AUTHOR: Jason J. Roque, MS, CFP®, APMA®, AWMA®
TITLE:       Investment Adviser Rep – CCO
TAGS:   S&P 500, NASDAQ, Rates, Inflation

Last week felt like Opposite Day. Will this continue or will data begin to be better represented on the markets?

Monday                            S&P 500 3.20% | NASDAQ 4.29%

Markets tumbled to open the week. The elevated volatility makes the day’s move far too common. The interesting move on the day was that it was a red day for most sectors. Equities and oil will contradict each other typically, however, they all fell on the day. The 2-year and 10-year yields both fell for the day (Yields and prices move in opposite directions). It what appear to be a safe haven bid for markets.

Tuesday                            S&P 500 0.25% | NASDAQ 0.98%

The day started firmly in the green as markets attempted to rebound losses from Monday. Those faded as the day wore on, but markets did remain in the green. Also making gains, was treasury prices as yields fell slightly.

Wednesday                      S&P 500 1.65% | NASDAQ 3.18%

Consumer Price Index (CPI) data came out on Wednesday. It showed that inflation softens slightly year over year, but less than was expected. The resilience of inflation will likely mean the aggressive nature of the Federal Reserve Board (FRB) should continue.

Thursday                          S&P 500 0.13% | NASDAQ 0.06%

Jobs data showed continued strength in the job market, to no one’s surprise. Additionally, the Producer Price Index (PPI) showed corporate inflationary pressure is persisting. PPI measures input costs for companies and is often a tell on if consumers should expect retail prices to rise. Markets were little changed on the day.

Friday                                S&P 500 2.39% | NASDAQ 3.82%

Markets rallied broadly on Friday. This was in spite of Consumer Confidence coming in weaker than expected. It is not surprising, as a weaker consumer creates less inflationary pressure. Less inflationary pressure means less cause for the FRB to be more aggressive on rates.

Conclusion                       S&P 500 2.41% | NASDAQ 2.80%

My kids like to play opposite day quite frequently. Yeah Dad, I cleaned my room… nope… Yeah Dad, I emptied the dish washer… really… Apparently, the stock market is taking a lesson from my kiddos. Good economic data, while good for the economy, signals a more aggressive FRB which will hurt future earnings prospects. Bad economic data, while bad for the economy, signals a more restrained FRB and therefore bodes well for future earnings. Look for opposite day to last the next year or so…

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