{"id":89934,"date":"2024-02-25T21:37:33","date_gmt":"2024-02-26T02:37:33","guid":{"rendered":"https:\/\/ifintechworld.com\/?p=89934"},"modified":"2024-02-25T21:37:37","modified_gmt":"2024-02-26T02:37:37","slug":"stock-market-bounces-back-from-inflation-inspired-dive-heres-the-message-for-investors","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=89934","title":{"rendered":"Stock market bounces back from inflation-inspired dive. Here\u2019s the message for investors."},"content":{"rendered":"
\n

For at least the third time since late December, the stock market suffered a steep one-day fall only to quickly claim back lost ground, leaving investors to divine what\u2019s really driving a bull market that\u2019s powered the S&P 500 and Dow industrials to multiple record highs in 2024.<\/p>\n

Here\u2019s what happened. Tuesday\u2019s January consumer-price index came in hotter than expected, forcing investors to reconsider expectations for as many as six quarter-point rate cuts by the Federal Reserve beginning as early as March or May. Over the next two days, stocks clawed back all or most of the Tuesday losses, with the S&P 500
\n SPX
\n ending Thursday at its 11th record close of 2024.<\/p>\n

\n

Stocks recovered because a mere delay in rate cuts isn\u2019t the catastrophe Tuesday\u2019s knee-jerk reaction implied, Tim Hayes, chief global investment strategist at Ned Davis Research, argued in a note.<\/p>\n

\u201cDoubts about the timing of something bullish\u201d \u2014 in this case, rate cuts \u2014 \u201cshould be distinguished from fears about something bearish, such as resurgent inflation or collapsing economic growth,\u201d he wrote.<\/p>\n

The Dow
\n DJIA
\n on Tuesday dropped over 500 points, or 1.4%, for its worst day since March of last year, while the S&P 500 also lost 1.4% and the Nasdaq Composite
\n COMP
\n shed 1.8%. The market then enjoyed a two-day bounce, with Thursday\u2019s gains attributed in part to a weaker-than-expected January retail sales report that appeared to soothe fears a surging economy would spark a renewed inflation wave.<\/p>\n

Stocks pulled back Friday after another hotter-than-expected inflation reading, this time from the January producer-price index. That left the Dow down 0.1% for the week, while the S&P 500 shed 0.4%, ending a run of five straight weekly gains.<\/p>\n

The market\u2019s kneejerk behavior in response to data that runs too hot or too cold makes sense, but it might take a few more data releases to establish either a new trend or to show that this week\u2019s data was a bump in the road, said Chris Zaccarelli, chief investment officer at the Independent Investor Alliance, in emailed comments.<\/p>\n

\u201cOur investment thesis for this year never relied on whether the Fed would cut six times or whether they would cut three or fewer times, rather, we believed that an expanding economy that doesn\u2019t fall into recession would perpetuate this bull market and only a recession \u2014 or severe growth slowdown \u2014 would meaningfully interrupt the rally that began at the end of 2022,\u201d he said.<\/p>\n

The bounce in stocks, along with a pullback by the Cboe Volatility Index
\n VIX,<\/span>
\n a measure of expected S&P 500 volatility over the coming 30-day period, was illuminating, said NDR\u2019s Hayes. The VIX, often referred to as Wall Street\u2019s \u201dfear gauge,\u201d broke above 15 on Tuesday, ending a streak of 63 sessions below that threshold, but traded at 14.41 Friday afternoon.<\/p>\n

\u201cIf equities had been driven lower by rising fear, in this case the fear of renewed inflation, then we would not have seen the recovery of the last two days,\u201d Hayes said. \u201dAnd we would not have seen the VIX drop back so quickly.\u201d<\/p>\n

That said, there are jitters among some market watchers over resurgent bets on declining volatility via the options market. A forced unwinding of those positions as the VIX surged got part of the blame for Tuesday\u2019s stock selloff, and analysts have warned that further ructions could lie ahead, recalling the \u201cVolmageddon\u201d episode that rocked markets in 2018.<\/p>\n

Need to Know:<\/strong> \u2018Volmageddon 2\u2019 may be coming to a stock market near you, says this analyst<\/p>\n

Meanwhile, the stock market\u2019s quick rebound frustrated traders looking for a sustained pullback.<\/p>\n

\u201cI am growing increasingly frustrated with these one-day wonders as these single day wipeouts continue to be used as buying opportunities,\u201d said technical analyst Mark Arbeter, president of Arbeter Investments, in a Thursday note.<\/p>\n

With Tuesday\u2019s slump, the stock market has seen \u201cthree nasty days in less than two months,\u201d he said, with the first on Dec. 20 when the S&P 500 fell 1.5% and the second on Jan. 31 when the index dropped 1.6%. <\/p>\n

The Dec. 20 drop was followed by a small, five-day rally, a minor pullback low, and then a record high. The Jan. 31 slide was followed by a seven-day rally to another round of highs.<\/p>\n

Arbeter reiterated the market appears \u201ccertainly due for more downside technically,\u201d but noted the major indexes remain in uptrends off their Oct. 27 lows. The S&P 500 fell near its 21-day exponential moving average \u2014 an important level of support on the chart \u2014 before bouncing. As of Thursday it stood at 4,930, and if it gives way, minor support and the 50-day simple moving average stand at 4,800, Arbeter said.<\/p>\n

A drop below 4,800 would set up a \u201cclear shot\u201d to the downside at 4,600, which marks strong chart support, he said.<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

For at least the third time since late December, the stock market suffered a steep one-day fall only to quickly claim back lost ground, leaving investors to divine what\u2019s really driving a bull market that\u2019s powered the S&P 500 and Dow industrials to multiple record highs in 2024. Here\u2019s what happened. Tuesday\u2019s January consumer-price index […]<\/p>\n","protected":false},"author":1,"featured_media":89935,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-89934","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nStock market bounces back from inflation-inspired dive. 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