Inflation may have only cooled slightly during the month of July, but it was enough to send the major indices surging in Wednesday’s session. Along the way, tech rebounded after some recent weakness and the S&P snapped a four-day skid.
The headline CPI print rose 8.5% last month, which is still way too hot to handle but did cool from the previous month’s 9.1% and was better than expectations at 8.7%. For the moment, investors are only concerned about the direction, and this marked the first decline in quite a while.
Furthermore, the month-over-month and core results were also better than expectations. If we see another broad-based reduction in inflation for August; investors are hoping that the Fed might ease off a bit for the next rate hike in September.
The NASDAQ jumped 2.89% (or about 360 points) to 12,854.80, which broke a three-day losing streak for the index amid revenue warnings from major chipmakers like NVIDIA (NVDA) and Micron (MU). Most impressively though, the index has climbed out of very deep hole.
“Today's rally officially saw the Nasdaq exit their bear market and begin a new bull market,” said Kevin Matras in Options Trader.
“The Nasdaq needed to close above 12,775.32 from their low close of 10,646.10… they are now up 20.75% from their low close. That doesn’t mean stocks are going to go straight up from here. But it does suggest the worst may be over for the Nasdaq now that their bear market has ended.”
Meanwhile, the S&P ended a four-day slump by soaring 2.13% to 4210.24, while the Dow advanced 1.63% (or around 535 points) to 33,309.51. The indices are now in the green for the week; the S&P and NASDAQ are going for a fourth straight weekly advance.
In other news, an after-the-bell report from entertainment giant Disney (DIS) reminds us that there are still some big names left to report this season. Mickey’s company beat on both the top and bottom lines in its fiscal third quarter, as spending at theme parks and Disney+ subscribers were on the rise. Shares of DIS were up 4% in the session and are currently higher by approximately 7% afterhours, as of this writing.
We’ll be getting more inflation data tomorrow with the PPI, as well as the weekly look at jobless claims and hundreds more earnings reports. Hopefully, this positive momentum will continue, but savvy investors like Brian Bolan want you to remain vigilant.
“The CPI number was the market mover of the day, and the it showed zero growth. Some people mistakenly interpreted that to mean that there was no inflation – but that isn’t true at all. Inflation was 8.5% in most recent month and we should expect that number to maintain near or above that level,” said the editor in today’s Home Run Investor.
“All I am saying is that we are still rather deep in the woods. There will be gaps of space where we won’t see trees, but that doesn't mean we are out of the woods. We are just in a clearing.”
Today's Portfolio Highlights:
Income Investor: Shares of Costco (COST) have pulled back a bit this year, which is giving Bryan a great opportunity to add a market leader at an attractive price. This Zacks Rank #2 (Buy) operates membership warehouses all across the globe, which puts it in the highly-ranked Retail – Discount stores space (Top 39%). It’s dividend of $3.60 is respectable, but the editor is most impressed with COST’s penchant for consistently raising the yield and even paying several large special dividends over the years. “The growth trend of dividends is often more important than the absolute value of the current dividend itself,” he said. Don’t miss this service’s weekly write-up tomorrow.
Stocks Under $10: Earnings estimates for Berry Corp. (BRY) have pulled back since the independent upstream energy company missed earnings estimates by a couple cents. Now the stock has slipped all the way to a Zacks Rank #5 (Strong Sell), so Brian decided to sell BRY and collect a nice 24% return in a month-and-a-half. In other news, the cooler-than-expected inflation print was a big help to the EV space on Wednesday… and gave this portfolio the best performer among all ZIC services as Lordstown Motors (RIDE) jumped 10.6% in the session. However, that was just the tip of the iceberg. This portfolio had three other names in the top 5 today, including Yellow (YELL, +9.9%), Renesola (SOL, +8.3%) and AXT (AXTI, +8.1%).
But there’s more! This service also had ALL of the top five names on the monthly scoreboard, including Yellow (YELL, +92.9%), Lordstown Motors (RIDE, +50.9%), Altus Power (AMPS, +39.1%), CECO Environmental (CECE, +35.4%) and EZCORP (EZPW, +32.6%).
All the Best,
Jim Giaquinto
