Nasdaq Index, Dow Jones, S&P 500 News: Stocks Rebound After Inflation Worries Subside

Key Points

• Market recovers from inflation jitters.
• Tech and travel stocks lead gains.
• Fed decision looms, but bullish outlook remains.

Bulls Regain Momentum After CPI Jitters

Following a turbulent session spurred by concerns over inflation, the U.S. stock market exhibited resilience, with Wednesday witnessing a mild rebound. Investors, reevaluating their inflation outlook, contributed to the market’s resurgence, finding solace in subdued inflation data from the UK and India alongside disinflationary trends unveiled in recent earnings reports.

At 15:11 GMT, the Dow is trading 38326.22, up 53.47 or +0.14%. The S&P 500 Index is at 4980.69, up 27.52 or +0.56% and the Nasdaq-100 Index is trading 15770.70, up 115.11 or +0.74%.

Earnings Update

The standout performers included Lyft, which soared over 28% post-earnings, defying expectations. Conversely, Airbnb experienced a slight dip despite revenue outperformance. Robinhood Markets and Angi similarly impressed, driving their respective shares higher on the back of earnings beats.

However, Kraft Heinz’s bleak forecast and underwhelming earnings dampened spirits, leading to a minor decline in its stock value. Despite this setback, overall market sentiment remained buoyant, underpinned by optimistic forecasts from Barclays suggesting a substantial influx of cash into risk assets in the coming months.

CPI Shake Up Overdone?

The influence of the Consumer Price Index (CPI) loomed large, with January’s figures coming in slightly higher than anticipated. While this may postpone expectations of imminent Fed rate cuts, market participants remain undeterred, viewing the pullback as an opportunity for valuation realignment rather than a precursor to sustained downturns.

Chicago Federal Reserve President Austan Goolsbee echoed this sentiment, expressing confidence in the gradual easing of inflationary pressures. With core inflation hovering around the Fed’s target and goods inflation showing signs of retreat, the overall outlook remains favorable.

Short-Term Forecast: Bullish

Amidst prevailing uncertainties, the underlying fundamentals of inflation, interest rates, and corporate earnings continue to support bullish sentiments. As such, we anticipate a resumption of upward momentum in the near term, propelled by renewed investor confidence and robust economic indicators.

Technical Analysis

E-mini S&P 500 Index futures are higher on Wednesday, but inside yesterday’s trading range. Typically, this chart pattern can be two things:  a transition from bullish to bearish, or a launching pad for another leg higher.

Taking out the all-time high at 5066.50 will signal a resumption fo the uptrend, while a move through the swing bottom at 4866.00 will change the minor trend to down.

The distance between the current price at 4996.75 and the 50-day moving average at 4832.64 is still rattling traders, with some technical indicators signaling the overbought alarm The indicator may be saying that but the higher-top, higher-bottom formation is not.

Essentially, it’s going to take a change in the chart pattern rather than an oscillator to signal the selling is greater than the buying at current price levels. To those leaning toward bearish, this may have taken place on Monday with the formation of the closing price reversal top.

Conditions appear to be changing so watch for heightened volatility.