Crossing Wall Street – October 14, 2022

“The expectation of an event creates a much deeper impression on the exchange than the event itself.” – Jose de la Vega, 1688

Jose de la Vega wrote those words more than 330 years ago, and he was proven correct again this week. Let’s look at what happened. On Wall Street, traders were on pins and needles ahead of Thursday’s CPI report. So much so that on Wednesday afternoon, the S&P 500 closed at a two-year low.

On Thursday morning, the CPI report came out, and it was more bad news. Inflation still isn’t transitory, and it still isn’t contained. It’s not just energy prices, either. Core inflation is now at a 40-year high. The report surprised Wall Street, and it immediately caused the stock market to tank.

Three minutes after the opening bell, the S&P 500 plunged below 3,500. The index hadn’t been that low in nearly two years. At its low, the Dow was off by 550 points. The last time the stock market was this low was three days after Election Day in 2020. All of the gains since then were erased.

But this is Wall Street, and sentiment can change on a dime. The low prices were enough to tempt the bulls to come charging back into the market, and boy did they. The S&P 500 rallied more than 5% in just three hours. After six straight daily losses, the S&P 500 closed higher by 2.6%. Vega was right.

So we went from down 2% at a 52-week low to closing higher by more than 2%. Confused? Don’t worry. I’m here to sort things out. In this week’s issue, we’ll break down the CPI news and its impact on the economy. We also have Q3 earnings reports coming. I’ll unveil the Q3 Earnings Calendar for this earnings season.

We have three Buy List reports due out next week. I’ll preview them all. I think there’s a good chance we’ll see Stepan increase its dividend for the 55th year in a row. (That’s kind of like betting on the sunrise.) But first, let’s look at what the CPI report means for us.