SNP500 – Fed Members Advise They Still Believe Inflation Will Fall But May “will be a bumpy ride”

The USA500 has again crossed above the 75-Bar EMA and above the “neutral” within the RSI. The asset is also forming its third “higher high” which also indicates a potential bullish trend. Technical analysts point out that both oscillators and trend indicators are pointing to a higher price target. So why is the stock market increasing in value?

As mentioned throughout the week, the inflation rate will be unable to maintain a longer-term downward trend unless it becomes significantly higher than expectations. Analysts initially anticipated a decrease in inflation from 3.4% to 2.9%; however, a decline to 3.1% is still regarded as a reasonable adjustment. Furthermore, inflation rates in other sectors also experienced declines, contributing to an improvement in investor sentiment. Consequently, investors viewed the lower prices as an opportune moment to enter the market at more favourable levels. Moreover, concerns among investors were alleviated by statements from Federal Reserve members, including Mr. Michael Bar and Mr. Goolsbee, who acknowledged that achieving the 2% target may encounter challenges but reiterated that inflation is indeed trending downwards.

The best performing stocks within the index yesterday were Illumina (+5.23%) and Netflix (+4.47%). The worst performing stocks were Kraft Heinz, Biogen Charter Communications and Airbnb. 78% of the NASDAQ ended the day higher and 28% rose more than 2% in the session, which is general high.  The most important quarterly earnings data which remains is the QERs for NVIDIA next week. Analysts expect NVIDIA’s earnings and revenue to again rise above the previous quarter’s figures.

The next price drivers will be this afternoon’s Retail Sales data, Unemployment Claims and Empire State Manufacturing index. Ideally investors will want to see data read as expectations or slightly higher, but not high enough to make the Fed feel at ease about the restrictiveness of the monetary policy. In addition to this, investors will have their eyes fixed on tomorrow’s Producer Price Index.

The debt market is still in an upward trend, not allowing the index to update its highs for the year. The 10-year bonds are trading at 4.235%, above its February 1 low of 3.877%, and the 20-year yield is 4.525%, up from the 4.213% reported earlier in the month.

Moving away from past economic data, the index was supported by the Quarterly Earnings Report from Cisco. Cisco’s quarterly earnings report, made public early this morning, beat earnings and revenue expectations. The company’s earnings per share were 3.80%, higher than expectations, but the stock fell 5% after market close. The decline was mainly due to poor expectations for the coming quarters. Investors now turn their attention to Applied Materials which will release their earnings tonight.