After a rough start to the year, markets have charged back and the S&P is now up 4.1% ytd, following Nasdaq’s 5.8% rise. A theme for this year was the intensity of inflation, and when/ how quickly it might turn lower. And yesterday’s sequential decline has given hope to those expecting FOMC rate cuts later in 2023. As a follow up to that CPI data, University of Michigan today was better than expected (64.6 versus estimates of 60.5), with the 1-year inflation component falling to 4% from 4.4% in December.

Survey says……6.5% YoY! That’s right folks, CPI continues to trend in the right direction and reports in line with estimates. Traders have been waiting with bated breath since the beginning of the new year, hoping to see a CPI print that could bring some positive energy back to the markets. While today was a welcomed improvement in CPI, most were hoping to see it come in below estimates and the market’s reaction was in line with these expectations. On top of the data, we heard from multiple Fed speakers today.

No news, no data and no Powell, equated to another market pop today. Based on the past week of predictions from various strategists, the only thing we do know is that the market will move violently, depending on where CPI comes in. Most resources put very small probability on a hotter CPI (above 6.6%), thus high expectations for a downside surprise (CPI fixings market has been flawless over the past year and expects a -0.13% m/m SA headline print).

Powell stole the show today… Sometimes it’s all about what you DON’T say, and today certainly felt like that was the (bull) case for markets. Side-stepping much of any word on economic or monetary policy, aside from a generic affirmation that the Fed is tightly focused on meeting inflation and employment goals, the Chairman instead shifted the attention to establishing boundaries around the Fed’s limited role in climate regulation.

Week 2 of January has begun and those old habits are already starting to creep in. Dry January? A pipe dream – best case scenario the month winds up being damp. New Year’s resolutions have no doubt gone by the wayside already. Unless you’re like yours truly where past goals of learning a new language have morphed into drinking more water. It’s about being practical people. That has been a struggle for investors long before today, what with the bad is good, how good is bad narrative that’s plaguing portfolios these days.

The markets continued the trend of “bad news is good news”, with all sectors closing in the green on the back of today’s ISM data. With ISM services coming in at 49.6 (down 6.9 points), it marks the first contraction since May 2020 and was the main fuel for today’s rally. Traders seem to be taking this ISM miss and a slowing in average hourly earnings (MoM) as a sign the Fed will soon pivot from rate hikes. Yields fell dramatically with the US10y retreating to 3.563%, the DXY (-1.08%) closed below 104, and the S&P(+2.28%) pushed to 3895.

The US is currently riding the struggle bus. While the RoW enjoys a decent start to 2023 (EU/China in particular), the combo of strong labor data and persistently aggressive Fed-speak is keeping a lid on the US stocks. Only 1 sector finished in the green today –Energy, and it was simply stemming the bleeding from the past few days. Consumer Discretionary succumbed to the weakness in the last few hours of trading and even a boost from TMUS (+3.2%), thanks to a beat in postpaid phone subscriber growth (we remain unconvinced), was unable to hold Telcos higher.

Rocky terrain out there as markets look to find direction in the New Year- just as they did in the old year!.. Jittery may be a fitting description as we ease into the first week of trading in 2023. Markets getting knocked lower after the open on ISM data release and briefly touching negative territory before rallying into the afternoon where participants awaited the Dec 14 FOMC minutes release, after which, markets stumbled into the close, but ultimately managed to clock a gain on the day.

We’re back! Bright-eyed and bushy-tailed, refreshed and energized (ok maybe not quite just yet) as we turn the page on what was a difficult year for all; and that’s putting it mildly. Historical returns in the first month of the year have augured well for a full year’s performance and so this morning’s green futures were met with a bit of optimism, cautious at most though. An easing of infection waves in China and a below consensus reading on German inflation (remember it was the ECB that was largely behind the December kerfuffle) had their respective markets firmly in the green.

Markets are no longer in the holiday spirit as they fell for the third day in a row. The CPI numbers from Tuesday were not enough to push them higher into yearend as continued hawkish rhetoric for the Fed has rattled the markets. Investors saw early week gains wiped out as the SPX (-1.1%) closed in the red and below its 50d (3863). Global PMI data this morning provided no relief as all came in below surveyed estimates, adding to the argument that a recission is on the horizon.