[Chart courtesy of MarketWatch.com]

1. Moving the markets

Despite a slow start, the S&P 500 and Nasdaq found some upward momentum late in the session and broke out of a sideways trend with the former scoring a new all-time high.

Anxiety about the Consumer Price Index (CPI) faded with the index rising in March by 0.6% vs. 0.5% expectations. YoY we saw a 2.6% increase, which also was a tad higher than expectations of 2.5%. Overall, traders were relieved that the outcome was not as bad as feared.

Also keeping a lid on prices early on was news that the rollout of Johnson & Johnson vaccine was halted, which kept trading activity on a subdued level. The reason for the pause were investigations of six reported cases of a rare and severe type of blood clot, the FDA stated.

The volatility index (VIX) continued to crawl sideways and has now closed below 20 for 10 straight days, something that has not happened since February 2020, according to ZH. Bonds were bid, meaning yields drifted lower, as did the US Dollar, which allowed gold to have a day with a green close and a gain of 0.74%.

Here’s another record that ZH pointed to, namely that the S&P 500 ETF (SPY) has now closed above its opening price for the 13^th day in a row. Since the SPY’s inception in 1993, this has never happened before.

This makes me go “hmm.” Could market manipulation possibly have something to do with it?

[Chart courtesy of MarketWatch.com]

1. Moving the markets

Subdued trading best describes today’s session during which the major indexes operated within a tight range. Despite a red close, the losses were minor, and the activity resembled a lack of motivation due to key inflation data and first quarter earnings awaiting on deck.

Market volatility continued to decline, as seen by the S&P 500 having now traded within a 1% range for the fifth session in a row. Reopening optimism was a major contributor with the VIX “fear” gauge trading below 18, a level last seen over a year ago.

The current focus is on tomorrow’s CPI release, which is considered the benchmark for measuring inflation, although the index is faulty in that it does not include day-to-day items that we all know have increased in price.  

Fed chair Powell made an appearance on “60 Minutes” last night and had the following to say:

We want to see inflation move up to 2% — and we mean that on a sustainable basis, we don’t mean just tap the base once, but then we’d also like to see it on track to move moderately above 2% for some time.

And then what? I disagree with his statement, because it makes you think that inflation can be controlled or simply turned off, once it exceeds or reaches a desired number. Unfortunately, history is riddled with evidence showing that once the genie, aka inflation, is out of the bottle, you can’t put it back in.

For the day, we saw 10-year bond yields treading water, the US Dollar meandering aimlessly, while gold slipped 0.72%.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

After two days of aimless sideways meandering, the markets broke out to the upside although in moderate fashion. Nevertheless, it was enough of a spurt for the S&P 500 to score a new record high, while the index stopped just short of breaking through the 4,100 level.

“Growth” outperformed “value” by a wide margin leaving some analysts wondering if the value surge has come to an end in favor of growth. However, these swings can reverse at any time, and it’s wise to be exposed to both.

Initial Jobless Claims disappointed again with 744k Americans filing for new unemployment benefits for the first time, far worse than the expected 694k. When looking at the bigger picture, it’s revealed that over 18 million Americans are still on government benefits, despite broad re-openings across the country.

Still, optimism runs rampant that the next few months will see huge job gains with some forecasting that employment will return to pre-pandemic levels by the end of the year. I am not sure if that view is simply designed to keep the market pumped up, because that does not seem realistic to me, as the recovery is spotty or uneven at best.

The US Dollar resumed its downward trend, while 10-year bond yields slipped again to reach 1.65%. This combo helped the gold ETF GLD to bounce nicely by gaining +1.06%, on par with the Nasdaq advance.

As we go forward, financial support via fiscal policy, and continued asset purchases by the Fed, will be the foundation for further advances.