It's too early to say if the ‘soft-landing’ groupthink was too much, but this kind of conviction about anything raises red flags. In the past, it proved to be wishful thinking.

Roses are red, and the stock market is on down days, too. There wasn’t much love for the stock market yesterday, although dip buyers emerged in the last hour of trading. Consumer Discretionary (XLY) stocks took it the hardest, weighed down by consumer durables & apparel and autos.

This chart from the Daily Chartbook underscores the dramatic reversal of fortune for the market as new lows on the S&P 500 erupted and new highs plunged.

Market Breadth was nasty across the board.

Market Breadth	NYSE	NASDAQ
Advancers	235	733
Decliners	2,625	3,619
New Highs	39	43
New Lows	48	125
Up Volume	333.57 million	1.07 billion
Down Volume	3.97 billion	4.56 billion

Whack-A-Mole

The day after, small-cap value enjoyed its best session versus large-cap growth.

The Russell 2000 gap lowered and closed below its 50-day moving average. It's hovering above a critical test of support.

This index is considered a proxy for the U.S. economy but has struggled mightily from higher interest rates.

The Canary Goes Wild

Suddenly, the generally calm, cool, and collected bond market is all over the place.

Even as significant equity indices settled down into the close, the CBOE Ten-Year Bond Yield continued higher, and that’s where the session finished.

Portfolio Approach

We closed a position in Consumer Discretionary and are adding a new position in Energy in the Hotline Model Portfolio. If you are not a current subscriber to our premium Hotline service, contact your account rep or email Info@wstreet.com to join today.  

Today’s Session

The market is coming to grips with fewer rate cuts, but the overarching narrative is that yesterday’s CPI report was a blip.

For a while, everyone on the street talked ominously about the so-called sticky inflation. Now, suddenly, it’s not a big deal. 

It is a big deal and something the Fed must grapple with. I think overall bias is still to the upside for the stock market, however, with a tighter trading range/channel.

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