Markets Resume Rally As Inflation Worries Ease
3:07 pm Friday, August 12th, 2022
The stock market ended on a high note after the Import-Export Price Index for July pointed to possible peak inflation, piling on to the CPI and PPI reports this week. Falling oil prices and the better-than-expected preliminary August University of Michigan Consumer Sentiment reading added to the early buying efforts.
Market participants have been keeping a close watch on the 4,231 level for the S&P 500, which marks a 50% retracement of the losses the market incurred from the Jan. 3 closing level (4796.56) and June 16 closing level (3666.77). Some think a close above 4,231 will be a telltale signal that the June low was the low for the bear market. BTIG technical analyst, Jonathan Krinsky, teased that view last week on CNBC saying, “Since 1950 there has never been a bear market rally that exceeded the 50% retracement and then gone on to make new cycle lows.”
Many stocks are on the rise with this rally and the mega caps are leading the charge. The Vanguard Mega Cap Growth ETF (MGK) is up 1.2% versus a 1.1% gain in the S&P 500. The Invesco S&P 500 Equal Weight ETF (RSP), for its part, is up 1.0%.
Mega cap constituents are lifting their respective sectors today with information technology (+1.4%), communication services (+1.2%), and consumer discretionary (+1.1%) all outperforming the broader market.
Information technology is also helped out by its semiconductor components, which are having a strong showing today. The PHLX Semiconductor Index is up 2.4%.
Energy (-0.1%) is at the bottom of the pack amid falling oil prices with WTI crude oil futures down 2.2% to $92.25/bbl.
On an individual basis, Alibaba (BABA) and Pinduoduo (PDD) suffer losses following news today that five other Chinese ADRs plan to delist at the NYSE.
Separately, the Treasury market is mixed with the 2-yr note yield up six basis points to 3.25% and the 10-yr note yield down three basis points to 2.86%. Those moves have followed the consumer sentiment report that showed some stubbornly high inflation expectations.
