Day Traders Diary
U.S. equities advanced for a fourth consecutive session on Wednesday, overcoming a hotter-than-expected January CPI reading. The Nasdaq Composite led the rally, adding 1.9%, followed by the S&P 500 (+1.3%) and the Dow Jones Industrial Average (+1.0%), both of which returned to positive territory for the year. The Russell 2000 added 1.8%.
The S&P 500 futures were up modestly in overnight trading, but dove more than 1.0% below fair value following the release of the Consumer Price Index for January, which prompted fears that inflation is picking up: total CPI increased 0.5% month over month (Briefing.com consensus +0.4%), while core CPI, which excludes food and energy, rose 0.3% (Briefing.com consensus +0.2%).
However, the market bounced back after investors had time to further digest the report, which, on a year-over-year basis, wasn't all that alarming: total CPI and core CPI are up 2.1% and 1.8% year over year, respectively, which is in line with where they've been for months.
The major stock indices opened with losses between 0.2% and 0.6%, but quickly bounced into positive territory. Stocks really started taking off at around noon ET and never looked back, with the Nasdaq, the S&P 500, and the Dow each closing near their best marks of the day.
Cyclical sectors like financials (+2.3%), technology (+2.0%), consumer discretionary (+1.6%), industrials (+1.2%), energy (+1.4%), and materials (+1.3%) led the charge, indicating that investors grew more comfortable with the inflation data, which is ultimately consistent with a growing economy and increased corporate earnings.
The countercyclical health care space (+1.1%) also outperformed, but the consumer staples (-0.1%), utilities (-1.2%), telecom services (-0.7%), and real estate (-0.6%) groups lagged.
In the bond market, U.S. Treasuries were weak ahead of the release of Wednesday's economic data--which also included a disappointing Retail Sales report for January (-0.3% actual vs +0.2% Briefing.com consensus)--and extended their losses in the aftermath, pushing yields higher across the curve. The benchmark 10-yr yield climbed eight basis points to 2.91%, which marks its highest level in more than four years.
Meanwhile, the U.S. Dollar Index declined 0.8% to 88.88 as the greenback gave up ground against the euro (1.2459), the British pound (1.4007), and the Japanese yen (106.97). The dollar/yen pair fell 0.8%, hitting its lowest level since November 2016.
Dollar weakness helped commodities, including crude oil; West Texas Intermediate crude futures climbed 2.3% to $60.57 per barrel. On a related note, the Department of Energy reported that U.S. crude inventories rose by 1.8 million barrels last week, which was roughly in line with estimates.
Looking ahead, investors will receive a big batch of economic data on Thursday. The Producer Price Index for January (Briefing.com consensus +0.4%), Industrial Production for January (Briefing.com consensus +0.2%), and Capacity Utilization for January (Briefing.com consensus 78.0%) are the most notable reports on the docket, but see Briefing.com's Economic Calendar for a full list.
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