It was the narrowest trading session of the year, as investors continued to look for clear answers and understanding of where the market is heading.

Although only two S&P 500 sectors finished in the green yesterday, none were down more than 1%.

The session had a more cautious tone, but the overarching narrative is a thirst for direction. Each day promises answers, and each day, we leave with more questions. Trends are clear, but investors want grand slam evidence.

The Heat Map was mostly a haze of crimson tones.

Federal Reserve: Friend or Foe?

In the Fed’s Financial Stability Report, inflation and monetary tightening are the top potential risks. In other words, the Fed does too little or does too much. Of course, the banking crisis is also a Fed topic, but Powell will unlikely do anything to make money market funds less attractive.

Consumer Price Index (CPI)

Maybe it’s because inflation is easing, or the Personal Consumption Expenditures (PCE) has taken on greater importance (PCE service ex-housing, to be exact), but the news isn’t moving the needle quite like it did last year. The jobs report has returned to the most important monthly data point.

That could change this morning with a report well outside Wall Street’s consensus.

However, it is another chance for the kind of answers this market desires to get off the dime.

Portfolio Approach

The Hotline model portfolio is fully vested. .

Today’s Session

There was a knee jerk pop in equity futures upon the release of the April CPI report, which came in mostly at consensus.

But there is consensus, and then there are whisper number. The fact is most market pros were bracing for a hotter number than the print we got this morning. The Cleveland Fed modeled for hotter results.

 

Core inflation is still major concern and could limit upside, but overall inflation is moving in the right direction.

Free Money Isn’t Free

We also learned real wages were down again.  The April reports marks 24 months in a row of declines, which is a well-known and loudly warned consequent of all that free money.

Modern Monetary Theory has been a disaster.

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