With earnings season mostly behind us, reported earnings came in "better than expected." This has put Wall Street analysts in an optimistic mood hoping the worst is behind us. However, before we dig into the data, let's review the market action this past week.
The latest NFIB data sends a recession alert, and the inflation data will likely keep the Fed on pause for now. However, the stock market hopes for a return to monetary accommodation. Unfortunately, both can't be right.
The debt ceiling and the Fed have consumed market headlines this past week. However, as noted last week, the short-term "sell signal" triggered. While the market rallied to the February highs last Thursday and Friday, the signals kept us out of trouble of being overly exposed to equity risk.
This week, the market mustered a rally as corporate earnings were not as "terrible as expected." Part of that rally came from short-term oversold conditions and a massive short position in the S&P 500 index.
Is a "rolling recession" helping the markets? Such was a thought proposed by Liz Ann Sonders last week that is worth thinking about. However, before that, let's review the market action from this week.
"Inflation eases" was the headline that consumed the media over the last few days. As discussed in more detail, while inflation eased, did it decline enough to halt the Fed's rate-hiking campaign? Michael Lebowitz noted on Friday that CPI remains well above the long-term trend.
While today's missive will explore why "reverse repo" is continuing to cause banking stress, the markets took a bit of a breather this week, as we suggested would be the case.
We live in interesting times as investors push stocks higher as recession indicators send a strong warning. However, that rise is not broad-based and is a function of a topic we posed in November 2022.
Despite concerns of a banking crisis, the markets triggered multiple buy signals as the market rallied for a second week. These buy signals follow our early February article discussing the "sell signals" at that time.