Stocks End Lower As Inflation Ticks Up Even Higher

Plus 5 New Strong Buys for Today Stocks End Lower As Inflation Ticks Up Even Higher [Kevin Matras - EVP - Photo] Profit from the Pros By Kevin Matras Executive Vice President Stocks End Lower As Inflation Ticks Up Even Higher [Stocks End Lower As Inflation Ticks Up Even Higher]Image: Bigstock Stocks closed lower after yesterday's higher than expected inflation report. The main indexes are still up for the week with the Nasdaq up 0.62%, the Dow up 0.43%, and the S&P still in the green by 0.08% with one more day to go. Yesterday's Consumer Price Index showed a 0.6% m/m increase, and 7.5% y/y, which was higher than the consensus for 0.5% and 7.3% respectively. But it was hardly a surprise. Inflation was running at a near 40-year high going into the report. And we're still at a 40-year high after the report. Give or take a few tenths of a percent, it's what was expected all along. For the record, ex-food & energy, it came in at 0.6% m/m and 6.0% y/y. But the report, in and of itself, didn't seem to have much of an impact on the market. The indexes opened lower, but then quickly made their way back up. It wasn't until St. Louis Federal Reserve President, James Bullard, said that he would "like to see 100 basis points in the bag by July 1," that stocks headed back down. And given that there are just 3 FOMC meetings scheduled before July 1st, that would mean one of those meetings would likely see more than a 25 basis point increase if that was the goal. Prior to yesterday's CPI report, the market had been effectively pricing in a quarter-point increase in March. But now the odds have shifted to a half-point increase. Of course, Mr. Bullard's comments should be taken with a grain of salt. He's a known hawk and has been calling for a bigger and faster rate hike all along. Nonetheless, his comments definitely moved the market yesterday, as well as expectations for what the Fed might do at their next meeting which begins on March 15 and ends on March 16. Whether it be a quarter-point or half-point move, let's not forget that rates are still at historically low levels, i.e., near zero today. And even at a 50 basis point increase, or a 100 point hike later this year, that would still leave rates at historically low levels. All in all, that will help wring out some of the excess that's stoking inflation, while still being accommodative for a strong economy and labor market. On a separate note, one interesting thing about yesterday's pullback was that it closed a gap left on the chart after Wednesday's gap-higher open. Common gaps are typically filled. And going back down to fill that in actually cleans up the chart and can be viewed as a positive from a technical perspective. We shall see how the markets react today. But buying on the market's previous weakness turned out to be the right thing to do. And it looks like that could be the case again. Let's also not forget that the Fed is talking about raising rates because inflation is hot in large part because the economy is so strong. And with Omicron fears fading and Covid restrictions being lifted, that bodes well for even more economic growth to come. And that means we could see a lot more upside to go in the market. So make sure you're taking full advantage of it. Best, [Kevin Matras - Signature] Kevin Matras Executive Vice President, Zacks Investment Research Sponsor [Zacks' #1 Semiconductor Stock (You probably haven’t heard of it)]( Our chosen small-cap is primed to withstand the supply crisis that’s hurting the giants. It's fresh off all-time highs but was caught in the recent market pullback. This means that you can now get aboard at a stunning bargain price. 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