Last week the market was down slightly after a very good start to the new year. I believe the decline was due to an overextended rally, and a wait-and-see attitude for this week’s important inflation data.
The stock market never moves in one direction for too long, instead it often moves in a stair-step pattern. Last week was a down week in an otherwise intact uptrend that began in mid-October. Investors are digesting mediocre earnings reports and uncertainties around this week’s inflation reports. A higher-than-expected inflation number has the potential to derail the market rally and is making investors weary.
The week’s first inflation report came out this morning and was close to expectations with the stock market taking the numbers in stride. Inflation has now come down for 7 months in a row, albeit at a slowing rate, and so the overall trend is good. The second inflation report comes out Thursday morning and will likely reinforce the information from today’s report.
Inflation and corporate earnings reports were the key market-moving data that investors were looking at to start the year and both were mediocre, but not terrible. Sometimes mediocre is good enough to lift the stock market as it looks for economic balance and stability rather than blockbuster economic reports in 2023.
Photograph by: Niklas Ohlrogge on Unsplash
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