The Buzz on Business for March 13th 2024

Inflation came in higher than expected for February, and as we all gathered around the telescreens, everyone here at the Ministry of Truth thought, oh my goodness, stocks are gonna get crushed. And we were wrong. On Tuesday, stocks likewise came in higher than expected, and the S&P 500 even hit a new all-time high.

Stock Market Report

If you had looked at the giant quote machine at the close yesterday, you would have never guessed that inflation was even a thing—mostly green numbers. Volume was good. Advancers led decliners. And as we said, a new all-time high on the S&P 500.

• The Dow Jones Industrials had a good day. They were up six-tenths of a percent. That’s 236 points, and the Dow closed above 39,000 at 39,006.
• But the S&P 500 really rallied. It was up a stout 1.1%, fifty-seven points, and closed at 5175.
• The NASDAQ composite was up 246 points, 1 1/2%, and closed at 16,266.
• Once again, the small caps underperformed. The Russell 2000 was off 0.25%. Down five points, and it closed at 2066.

Bond Market Report

Bonds were mixed, but rates were mostly higher. Not unexpected, given the hotter-than-expected inflation numbers

• The 2-year treasury was up five basis points and closed at 4.586%.
• The yield on the 20-year was also up five ticks, and it closed at 4.412%.

Oil, Gold, and Bitcoin

• Oil was off a minuscule $0.10, and a barrel will now set you back $77.98.
• Finally, gold had a down day. It was off $25.50 and closed at $2,163.10.
• Bitcoin sold off after the inflation numbers were released but recovered for a nice gain. It was up $496.54 and, at 4:00 PM Eastern Time, stood at $71,353.22.

Market Rallies on Higher than Expected Inflation 

We will confess to some surprise regarding the market’s reaction to the inflation numbers. They weren’t horrible, but they certainly weren’t good. Inflation came in at a 3.2% annual rate versus a 3.1% expectation. Core CPI came in at 3.8% versus a 3.7% expectation. And given the market’s reaction over the last six to eight weeks when we’ve gotten bad inflation news, well, it was reasonable to think that stocks would sell off. And they did initially, but rallied back almost immediately and closed near the day’s high.

The general consensus is—or seems to be—that this latest tick-up in the inflation rate will not knock the Federal Reserve off its proposed rate-cutting schedule for the balance of the year. We’re not so sure. Recall that in January, the consensus was that we would see a rate cut in March, and, of course, we have not. So far as we can tell, the Fed is entirely serious about fighting inflation, and given the relative strength of the economy, they have no reason to cut rates anytime soon, especially when inflation is pushing 5%.

Perhaps the better explanation for this rally is that the market just wants to go up. Corporate earnings have been strong and are getting stronger. Interest rates, at least, aren’t headed up. And we are in the middle—or maybe the beginning—of an Artificial Intelligence boom.

Still, the last four or five months have been a sight to see.