An afternoon rally in stocks helped drive the S&P 500 higher by 70 bps to close the day on Tuesday.
On the macro side, we first had the inflation data. The CPI came in at 1.5% YoY vs. 1.4% expected. The Core CPI came in at 1.7% YoY, slightly higher than 1.6% expected. Although the CPI is not the Fed’s preferred measure for monitoring inflation, a higher than expected CPI would calm some fears that the US could be headed for deflation.
The Empire State manufacturing index was a big miss; the index fell to 1.29 in April from 5.61 in March. Analysts were expecting the number to rise to 8.0. We saw another miss in the NAHB Housing Market index which came in at 47 vs 50 expected. The previous month’s number was also revised down to 46 from 47. This was the third straight month that the index remained below 50, which is not a good sign for the home builders.
We also had Fed chair Janet Yellen speak but she didn’t say much in the way of monetary policy. Yellen said that there was still room for tighter capital standards and regulations for large banks.
On The Forum
Much like the rest of the market, many participants on the Hammerstone Forum do not have a strong conviction on the direction of the market on either side. One of the participants suggested earlier in the day that the SPUs have been making higher highs and higher lows, which is generally seen as a bullish sign, but many others were hesitant to take a bullish view.
Participants on the forum exchanged ideas on some bargain stocks after the recent meltdown in the momentum complex. However, many participants appear to be hesitant to take sizable positions in high-beta names, fearing that the recent rout might not be over yet.
Fed Chair Janet Yellen speaks again today, and unlike yesterday, today we might get some comments on monetary policy as well. She will be speaking at 12:25PM at the Economic Club of New York. We also hear from Lockhart (8AM), Stein (8:30AM), Lockhart again (12PM), and Fisher (1:25PM) today.
In terms of Macro Data, we have Housing Starts/Building Permits (8:30AM), and Industrial Production/Capacity Utilization (9:15AM.) Initial Jobless Claims and Philly Fed are on tap for tomorrow.
Although Yellen’s comments could be important, we believe that the earnings would remain in focus and drive the market forward in the near future. Still to come in earnings this week: AXP, COF, GOOG, IBM, SNDK (tonight); and BHI, BLK, DD, GE, GS, HON, MS, PEP, SLB, UNH, UNP (tomorrow.)
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