Inflationary Pressure Falls Short | Daily Market Update

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Wednesday, March 10, 2021

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Inflationary pressure falls short of lofty expectations

The headline Consumer Price Index (CPI) rose 0.4% month over month in February, in line with Bloomberg consensus expectations and only a tick higher than January’s print. Core CPI, which controls for volatile food and energy prices, rose 0.1% month over month, slightly below Bloomberg forecasts for 0.2%. Despite weather-related disruptions and rising activity, inflationary pressures appear well contained. We take a closer look at the potential investment implications of rising inflation in today’s LPL Research blog, available at 12pm ET.

Daily Insights

U.S stocks rise after data shows inflationary pressure is softer than expected

  • European markets are mostly higher in midday trading with the United Kingdom lagging.
  • Asian stocks were mixed overnight with gainers finishing off their intraday highs.
  • A near $1.9 trillion stimulus bill is poised to pass in the House of Representatives, due for President Joe Biden’s signature next

Big bounce

After multiple weeks of weakness, tech and other heavily beaten down names bounced significantly Tuesday.

  • After reaching a 10% correction, the Nasdaq added 3.7% for its best day since right after the U.S. Election in November 2020. Read more about the Nasdaq correction on the LPL Research blog.
  • Solar and clean energy were two of the hardest hit groups, but each had a historically good day, with solar up nearly 13 % and clean energy up 8%.
  • Semiconductors added nearly 6%, for its best day since April 2020.
  • Although the gains in tech and other areas were historically strong, only 53% of all stocks on the New York Stock Exchange (NYSE) were higher, suggesting the strength wasn’t broad based.

Technical update

Growth stocks roared back on Tuesday, leading the Nasdaq to its largest daily gain since November 4. The move may have been assisted by falling Treasury yields, as the 10-year yield retreated 6 basis points to 1.52%. Energy was the worst performing sector, as oil prices pause at their 2019 highs.

COVID-19 news

The United States reported 56,000 new COVID-19 cases on Tuesday, down 1.5% week over week as the rate of decline appears to be slowing, raising concerns that the outbreak of the B117 variant is beginning to spread (source: Johns Hopkins).

  • The seven-day average of vaccinations in the U.S. is rising slowly, currently pacing around 2.2 million per day.
  • Trends in Europe are little changed, with Italy reporting a surge in cases, while the United Kingdom continues to report falling cases.
  • Brazil continues to battle a surge in cases as they grapple with the outbreak of the P1 variant.

Rising Rates And Stock Market Performance

LPL Research discussed the market signals supporting the potential for stock gains in the current rising rate environment. Read this week’s Weekly Market Commentary.

Why Higher Rates Aren’t Bad For Stocks

In this week’s Market Signals podcast and video, Chief Market Strategist Ryan Detrick and Equity Strategist Jeffrey Buchbinder discussed why higher rates historically haven’t been bearish for stocks and why they don’t think they will be this time either.

 

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