Yesterday, we saw rotation out of growth names in the S&P 500 into defensive and cyclical sectors.

The real action was nibbling in small-cap value, the bright spot in yesterday’s trading.

Small-Cap Value vs. Large-Cap Growth

Small-Cap Value iShares Russell 2000 Value ETF (IWN) has rallied for a third session and is picking up speed.

This year, the Russell 2000 Value (IWN) performed its best against the large-cap growth, iShares Russell 1000 Growth (IWF). We are looking into an abyss, so there is a long way to go if this is the start of something we can monetize. But the relationship is coming out of an oversold Relative Strength Index (RSI), and the rate of change is picking up. A close above the 50-day moving average is a potential strong buy signal.

This morning, all eyes are on the Consumer Price Index (CPI) report.

The Street is looking for headline CPI of 0.2% month-over-month (m/m) and 2.9% year-over-year (y/y) and Core CPI of 0.3% m/m and 3.7% y/y.

Interestingly, the Cleveland Fed sees the CPI below the consensus but a spike in the February number.

Rate Cut Watch

A ‘hot’ number would be very damaging for those that have stacked chips highly on aggressive rate cuts this year.  Consensus has already beaten a hasty retreat from 170-basis points (bps) in cuts toward 100-bps.

That means we remain on Ten-Year Bond Yield Watch.

The CBOE 10-Year US Treasury (TNX) tickled 41.97 yesterday. A close above 42.00 would trigger some selling pressure in the stock market.

Today’s Session

CPI came in higher than expected, but it's nuts that the consensus wasn’t higher.  I interview brilliant people every day, and I often wonder if they go to supermarkets or have relatives who are struggling.  None of the “news” in the CPI report surprises Main Street.

• Food is 13.5% of overall CPI, 0.4 from 0.2 the prior month.
• Rent is 7.67% of overall CPI, 0.6 from 0.4 the prior month.
• OER is 26.76% of overall CPI, 0.8 from 0.4 the prior month.
• Auto insurance is 2.79 of overall CPI, 1.4 from 1.7 prior month.

Critical support on SPX could be 4,779. 

 

Comments

Your comment" None of the “news” in the CPI report surprises Main Street." is absolutely correct. You are the only commentator that has any grip on the real market. Bless you. FRITZ E PIEPER on 2/13/2024 10:00:13 AM

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