CWS Market Review – April 12, 2024
“The market may be crazy, but that doesn’t make you a psychiatrist.” – Meir Statman
The stock market got stung on Wednesday by a surprisingly strong inflation report. Both core and headline inflation exceeded expectations last month. Just when we thought inflation was safely back in its pen, the government tells that that’s not so.
Traders did not take the news well. In Wednesday’s trading, the stock market dropped nearly 1%, and the Dow lost over 400 points. During the trading day, the S&P 500 fell to a three-month low. The index is getting close to falling beneath its 50-day moving average, which is something it hasn’t done in five months.
As bad as the large caps were, the little guys did much worse. The Russell 2000, an index of small-cap stocks, fell over 2.5% on Wednesday. Many housing stocks, such as REITs and homebuilders, were down over 4%.
Truthfully, the market’s behavior this week wasn’t unusual. What was unusual was the market’s calm and steady manner for over five months. That’s why this week’s CPI report was so jarring.
Thanks to the recrudescence of inflation, the idea of an interest-rate cut this spring is off the table. It now looks like the Federal Reserve won’t touch interest rates until September at the earliest. In fact, there may only be one rate cut between now and November. This is a major shift in expectations.
We’re also at the start of earnings season. This week, the Q1 earnings season officially got underway. In this week’s issue, I’ll unveil the Earnings Calendar for our Buy List stocks for this season. This is a crucial time for us. Over the next month, 21 of our 25 Buy List stocks will tell us how well they did during the first three months of the year.
This Wednesday, Abbott Labs will be our first Buy List stock to report. The stock got off to a nice start for us this year: it was a double-digit winner by early March, but it’s pulled back since then. I’ll have more about ABT in a bit. I also have some Buy List updates for us. But first, let’s look at the inflation report that sent Wall Street off in a tizzy.