And just like that, we’re back in the green again. Markets managed to shake off inflation fears and rally into the close today--- a truly impressive feat. Early on, data showed that the economy was still in strong shape, with Initial and Continuing claims both coming in below expectations. While this data is more regular, the slightly better numbers let investors believe the Fed will keep rates higher for longer. Philly Fed data this morning also added to the narrative, which despite its volatility, showed improving manufacturing activity expansion. Despite the implications that the economy could handle more hikes, the probability of a 75bp hike remained in the mid-30% range (as of this am). Yields moved lower throughout the day, while the dollar strengthened. Energy led thanks to crude’s move on the back of a report showcasing the further dip in US stockpiles. On the other hand were Telcos, which underperformed on the back of broker downgrades. While value led growth for most of the morning, by the end of the day they were neck in neck. It is also worth noting the move in Bed Bath & Beyond (BBBY, -19.6%), which fell after news broke that Ryan Cohen’s firm was pulling out. The day also brought mixed messages from Fed speakers – “Bullhorn” Bullard urged another 75bp hike, while Kansas City’s George struck a more cautious tone. The probability of a 75bp hike did increase to 40%, but with little fanfare. Tomorrow brings options expiry, Manufacturing PMI, and further Fed data (along with housing data). While the VIX is below 20, volumes remain muted and thus, moves exaggerated. The week is still far from over.
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