Nasdaq, Dow Jones edge higher after shaking off inflation fears

Jun. 11, 2021 5:06 AM ETInvesco QQQ ETF (QQQ), DIA, SPYBy: Yoel Minkoff, SA News Editor40 Comments
  • Something interesting happened in the stock market on Thursday. Shortly after the release of the Consumer Price Index, which showed sizzling inflation figures for May, the major averages opened higher, with the S&P 500 even setting a record at the close. In another surprise, Nasdaq had a better day than its cyclical peers as the growth trade outperformed value. Dusting off the old textbooks, rising inflation should weigh on corporate profits, reduce purchasing power and trigger fears of higher interest rates, but that's not being felt this time around.
  • What happened? Some investors may be following the "transient" camp, especially interest rate watchers that are listening to every word of Jay Powell. There is also a lot of buying power still out there and many traders are looking to ride the momentum. For others, new dynamics may be playing out in equities. Some fearful of government spending and a weaker dollar see risks in converting to cash. That could result in some sort of unconventional hedge in the stock market, especially in one that increasingly appears disconnected from the fundamentals (similar sentiment that's boosted crypto?).
  • "The technical setup for the broader market remains constructive," said Craig Johnson, technical market strategist at Piper Sandler. "Momentum indicators have improved and the majority of SPX stocks remain above their 200-day MAs and in MACE defined uptrends. We reiterate our year-end SPX price objective of 4,625." Overnight, stock index futures inched up slightly and continue to point green ahead of the open.
  • From the SA comments section: "Not a surprise. Markets rarely sell off on the same news, especially when the news is well anticipated," points out Charles Agbakwu. "Cash is trash. Park it in something that goes up," writes nothing_lasts. "The stock market is indestructible," adds Investing4FIRE, while calvinfroedge asks "Does anyone still think we have free markets?"
  • Are price pressures here to stay? Check out the bull vs. bear debate.

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