After a rare down week in 2017, indexes returned to gains albeit mild this past week. Almost all the action was contained on Wednesday when the market gained nearly 1% with much of that happened post a (widely expected) Federal Reserve announcing a quarter rate hike.
The Federal Reserve on Wednesday lifted a key short-term interest rate for the second time in three months, but in a sign of caution, the central bank stuck to its forecast for just two more rate hikes this year. The bank pointed to steady U.S. growth, an improving labor market and greater confidence among consumers and businesses to justify its decision to raise its fed funds rate to a range of 0.75% to 1%. The vote was 9-to-1. The president of the Minneapolis Fed preferred to leave rates unchanged.
The Fed also noted a recent uptick in prices has resulted in inflation “moving close” to its 2% target, another critical component in its decision. The bank’s preferred inflation gauge, the PCE index, rose at a 1.9% pace in the 12-month span ended in January — more than double the rate as recently as last summer.
At this point I believe even most bulls would love a 3-5% pullback to get re-positioned as it’s been a VERY long rally post election with nary a pullback of significance. But the 2 major indexes are just hanging in there. This current move without a 5% pullback is over 3 times as long as average since the 2009 bottom!
The S&P 500 has grinded higher for 182 trading days without a 5% pullback, the longest such streak since Feb. 11, 2004, according to Dow Jones data. Over those 182 days, the S&P 500 has gained nearly 19%. Since the start of the bull market — not counting the current run of trading days without a pullback of 5% or more — the S&P 500 has averaged going about 56 sessions before it pulls back 5% or more
On the economic front, Tuesday the government said producer prices jumped in February by 0.3%, above consensus expectations of 0.1%, bringing year-over-year wholesale inflation to 2.2%. Wednesday, consumer prices were reported to increase by 0.1% while the increase in inflation over the past 12 months advanced to 2.7% in February from 2.5% in January, putting it at the highest level since early 2012.Continue reading