The market closed in the green by the slimmest of margins yesterday, yet it was truly an impressive session. The S&P 500 climbed out of the hole twice as investors grappled with the question of inflation.

The rotation trade was in play as buyers sought opportunities in cyclical sectors rather than sell growth and flee to the sidelines.

Industrial Strength

Industrial (XLI) names made up half of the top ten advancers reflecting the dealmaking and the consumption ‘boom’ that comes with reshoring, data center building, and focus on rebuilding the domestic economy.

The Industrial Sector has been in a steady uptrend but recently failed to exceed the 50-day moving average. However, the rate of change (ROC) and the relative strength index (RSI) are turning higher.

For the record, the jump in bond yields reflects many things, including Jay Powell and Co. losing the thread. I do not believe there will be a spike in the inflation rate, but it’s a perfect storm for wealthy households to keep spending lavishly and everyone else trying to keep up. It's the American way.

This morning, we will receive the Consumer Price Index (CPI) report. It's critically important that it is in line with or better than the consensus.

Tense up, folks, it's earnings season.

Banks in the Batter’s Box

Wall Street is banking big time on big banks coming through.

Nothing To Fear

In addition to the ten-year bond yield, we are watching the Volatility Index (VIX), which has trended higher this year, hitting 22.0 on Monday.

Today’s Session

The Consumer Price Index for December was in line with consensus, and the market breathed a sigh of relief.

Need to Let More Air Out

The weight of inflation is still a powerful force, harming most American households. It's edging higher, but the news eases concerns that the conversation may be on how many rate hikes were coming instead of rate cuts.

It also has to be noted that the CPI came in at 0.4 % on a month-to-month basis and has excelled in back-to-back months.

On a yearly basis, core CPI was up 3.2% against a consensus of 3.3% and on a monthly basis went up 0.2% against consensus of 0.3%. That’s nudging bond yields lower and equities higher.

Banks Beat Big Time

The banks crushed it!

We will have greater detail in the afternoon note, but here is a quick score sheet.

Banks Big Bang	Revenue	Earnings	Guidance
GS	Beat	Beat	Higher
JPM	Beat	Beat	Higher
C	Beat	Beat	Higher
WFC	Miss	Beat	Higher

The market loves it and bids these names much higher ahead of the open.

Comments

Yes. Definitely. I think it will be difficult and may take much longer than we would like because of the terrible job of this current administration and the democrats wanting Trump and the Republicans to fail, but I still think things will get much better. Tom Hart on 1/15/2025 4:53:12 PM

The best change this country we'll ever see next to 1776. Cj on 1/16/2025 9:15:23 AM

6 years ago I saw the clinical symptoms and signs of dementia of the Alzheimer's type and Joe Biden. Joe Biden has destroyed the United States of America. The goal to succeed in in the USA is hard work and sacrifices. Joe Biden has Alzheimer's disease of the Alzheimer's type with secondary parkinsonism. Donald Trump is a hard-working man. Donald Trump makes me feel that he and I are the same level. To succeed in life needs hard work.For Americans to succeed we need hard work and sacrifices. BRIDGLAL RAMKISSOON on 1/16/2025 4:07:47 PM

Charles, yes, healing and prosperity provided a very united Congress and Senate behind Trump. That has not always been a GOP strength. I am cautiously optimistic and very hopeful about this "idea." John H Rooney on 1/17/2025 8:18:32 AM

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