May 15, 2024

After a mostly lower situation in the early afternoon, stocks made a nice rally to finish out another winning session and in the process the Nasdaq reached an all-time high best ever level.

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The Dow was lower by 60 points at 1pm before making a nice upside turnaround to finally end with a closing advance of 126 up to 39,558 led by buying in AXP, GS on strength in the financials, in addition to MSFT.

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The S&P, which was lower by 3 points at the same time, also made a terrific upside turnaround going into the close and ended 25 points higher at 5246 led by most financials and the technology and energy stocks once again. It is now around 0.1% below its late March record high.

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The Nasdaq, as mentioned above, was the only index that did not go negative in the early afternoon and led the upside with a 122 point gain to 16,511 for its best ever level. It was helped by advances in the three most highly weighted technology issues, namely MSFT, AAPL and NVDA. And the Dow and S&P got pulled higher by this discrepancy as to the strength of the Nasdaq most of the time pulling the other indices higher when there is a dichotomy in opposite directions between the two.

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The Russell 2000 Index did well with a 23 point advance on strength in small banks and ended at 2085.

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The VIX was able to go lower after Monday’s gains and ended down to 13.42 near the lower end of its recent range.

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The late gains closed out a mostly wobbly day of trading as investors reviewed a mixed report on inflation and await an even more important inflation update today with the April C.P.I. at 8:30am. Stocks have been generally gaining ground in May following a dismal April. And the numbers (see below) were interpreted as bullish with all of the major indices now at all-time highs.

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Several of the so-called meme stocks, including GME and AMC, raced higher in a reprise of the social-media driven frenzy of three years ago, but ended well off of their best intraday levels.

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The April P.P.I. report showed that prices remain stubbornly high at the wholesale level, before many price changes are passed along to consumers. The latest producer price index showed that inflation rose sharply in April with gains of 0.5% for both the overall and core ratings and a 2.2% gain year over year. The largest increases came in auto insurance and housing costs.

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Inflation pressures in the U.S economy are still substantial and the momentum that built up over the last few years is still rolling along. At the margin the Fed will see the April PPI report as another reason to slow down interest rate cuts.

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Bond yields edged lower. The yield on the 10-year Treasury slipped to 4.45% from 4.49% late Monday. The yield on the two-year Treasury, which more closely tracks expectations for actions by the Federal Reserve, fell to 4.82% from 4.86%.

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Investors have been curtailing their expectations for the speed and frequency of interest rate cuts this year as inflation remains hotter than expected. Traders are betting on one or two rate cuts this year, according to data from CME Group.

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Investors are still hoping the Fed can pull off its “soft landing,” where high interest rates work to cool inflation without slowing the economy into a recession. The economy remains strong, but consumers might be showing signs of fatigue under the weight of stubborn inflation. Economists expect a retail sales report on Wednesday to show that consumer spending softened in April, just as it has over the last several months.

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The latest round of earnings reports and company forecasts from retailers also show that consumers are struggling. Lower-income households are under a particularly heavy strain. Retail giant WMT will report its latest financial results on Thursday, giving investors more insight into consumer spending habits.

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At a panel discussion in Amsterdam on Tuesday, Fed Chair Powell reaffirmed that the central bank won’t likely raise its key interest rate to respond to stubborn inflation. He also said that his confidence that inflation will ease is “not as high as it was” because price increases have been persistently hot in the first three months of this year.

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Earnings have been a bright spot for markets, helping to support gains for major indexes in May after a rough April. Companies in the S&P are mostly finished with their latest results, which show a 5.3% gain in earnings overall.

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Stocks were mostly higher in Europe and mixed in Asia. Chinese markets slipped following U.S. plans to raise tariffs on imports from China.

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First-quarter earnings season is winding down with the following reporting this week: yesterday – Dow component HD lower and BABA also down; tonight - Dow component CSCO; Thursday – Dow component WMT plus AMAT, DE, TTWO, UA and BIDU.

Economic reports will be important with: yesterday – April P.P.I. naturally came in higher than expectations with a gain of 0.5% in both the overall and core rates and this was due to increases in auto insurance and housing. Year over year the advances were 2.2%; today – April C.P.I. was ahead by 0.5% and 3.4% year over year and these were slightly lower than expected, April retail sales were unchanged NY State Empire May Manufacturing Survey was down 15; Thursday – weekly jobless claims, April housing starts, April industrial production and capacity utilization; Friday – April L.E.I.