Record Highs for Stocks Despite Weak CPI and Sales Data; Bonds, Bullion, & Bitcoin Also Rise

Market Overview

Despite unfavorable data, stocks reached new record highs. The SuperCore Consumer Price Index (CPI) was higher than anticipated, while retail sales were significantly below expectations. Additionally, homebuilder sentiment has taken a hit, and Empire State Manufacturing is not performing well. Despite these factors, both 'soft' and 'hard' data are on a downward trend, and the threat of stagflation continues to increase.

Market Reaction

Despite the lack of growth, the market reacted positively, with increased expectations of a rate cut due to the 'cool' CPI. This resulted in a boost for stocks across the board, with Nasdaq leading the charge to new record highs. Trading volumes were significantly higher than usual, with hedge funds recovering half of their losses from the previous two days.

Trading Sentiment

Trader John Flood from Goldman Sachs noted a shift in sentiment from the last "meme" craze. Previously, some funds were willing to hold on and wait out the retail crowd, but now, hedge funds are less exposed to high SI/float stocks, making the risk more manageable. As a result, funds are reacting much more quickly based on past lessons.

Stocks, VIX, and Treasuries

'Most Shorted' stocks saw a decline, as the meme-stock mania stalled. The Volatility Index (VIX) also saw a significant drop. Treasuries were bid, with yields down across the curve.

Dollar, Gold, and Bitcoin

The dollar followed a similar pattern to yields, erasing all of the post-April CPI gains. Gold surged back near record closing highs, trading at the same level it was before April's CPI. Bitcoin also saw a significant rise, marking its best day since March 2023.

Crude Prices and US Macro Data

Crude prices rebounded strongly after early weakness, with the 100-day moving average acting as support. Despite the dismal US Macro data, the Citi US Macro Surprise Index suggests potential positive surprises as the fiscal year-end approaches.

Final Thoughts

Despite the mixed economic indicators and market volatility, stocks managed to reach new record highs. This unpredictable market behavior raises questions about the future of the economy. What are your thoughts on this? Do you think the 'no landing' narrative will come to fruition? Share your thoughts and this article with your friends. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.