[Chart courtesy of MarketWatch.com]

1. Moving the markets

Despite worsening inflation numbers, the markets jumped right after the opening bell, with only the Nasdaq losing momentum during the session, while the Dow and S&P 500 remained solidly in the green.

July’s CPI showed that prices surged 5.4% YoY, which was a tad higher than expectations of 5.3%. MoM the CPI increased at a rate of 0.5% in July. Sure, this could have supported a sell-off, but traders looked at it from a different perspective.

Because, when excluding the energy and food prices, the rise was only 0.3% last month, which was below the expected 0.4% increase. That’s how you turn a negative into a positive giving markets a reason to rally. After all, who uses food and energy anyway?

If you can believe it, this inflation reading, according to the mood on Wall Street, supports the Fed’s belief that these inflationary pressures are still “transitory” and a sign that the economy is indeed recovering from the pandemic. Go figure…

The battle between “growth” and “value” continued unabated, as Small Caps (VBK) took an early hit but managed to crawl back to their breakeven point, while “value” (RPV) ran with the bulls all day to score a 1.30% gain.

Bond yields stair stepped lower, with the 10-year bouncing off its 1.3% level to end around 1.34%, while the US Dollar index swan dived back to its unchanged level for the week. Despite that mixed showing, Gold surged higher with GLD adding 1.38% and again pursuing its $1,800 level.

Tomorrow, we will find out if the Producer Price Index (PPI) will have a surprise in store for the markets.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

Despite the Dow and S&P 500 climbing into record territory right after the opening, it was only the Dow that maintained its bullish momentum into the close. The S&P 500 floundered and battled with its flatline but managed to close a tad above it, while the Nasdaq stumbled in the red throughout the session.

Supporting the Dow was the Senate’s passage of the $1 trillion infrastructure package, which traders assume to assist those stocks benefiting from economic growth. At least that’s the theory, but as I have pointed out before, the economy needs a boost, as peak growth has decelerated.

Overall, markets were mixed with Small Caps (VBK) taking a hit of -0.78%, while “value,” as represented by RPV, added a solid +1.32%. That performance was outdone by the Commodities Index (DBC) with +1.81%, as inflation persists and creeps through that sector.

Bond yields continued their charge higher with the 10-year reaching almost 1.35%, which is a massive rebound from the lows of 1.12% just a few days ago. Given higher yields, it’s no surprise that the US Dollar ramped higher and has now reached a point that is close to its March highs.

Gold managed to break even and is trying to find some base from which to launch a new attack at its recently lost $1,800 level.

Leave it up to ZeroHedge to come up with another historical trend analysis, this time comparing the current S&P 500 performance with that of 1987:

I for one can’t wait to see if history repeats itself.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

The growth meme was the talk of the day on Wall Street, as concerns mounted again that not all is well in the world of economics.

Things started on a shaky foundation in the futures markets, with all major indexes in the red, while gold got hammered almost 3%, as one entity unloaded $4 billion in gold contracts. This was obviously an act of manipulation because an investor concerned with not moving markets adversely would liquidate a holding slowly and meticulously and not dump it all at once.

As the chart above shows, a mid-day rebound pushed the S&P 500 back above its flatline, but it slipped into the close with a minor loss, with the Dow following suit. The Nasdaq showed more bullishness and eked out a small gain.

The US Dollar continued its upswing from last Friday but wavered during this session yet gained modestly in the end. Not helping gold nor stocks was the 10-year bond yield which, after an early pullback, found some momentum and reclaimed its 1.3% level.  

Small Caps (VBK) slipped moderately while Value (RPV) gained a tad, as financials (XLF) were favored (+0.26%) due to rising bond yields.

Looking at the big picture, the markets went nowhere with some gainers offsetting some losers.