Stocks End Lower, In Spite Of Better Than Expected Inflation Report

Plus 5 Just-Added Strong Buys Stocks End Lower, In Spite Of Better Than Expected Inflation Report [Kevin Matras - EVP - Photo] Profit from the Pros By Kevin Matras Executive Vice President Stocks End Lower, In Spite Of Better Than Expected Inflation Report [Stocks End Lower, In Spite Of Better Than Expected Inflation Report]Image: Bigstock Stocks closed sharply lower yesterday with all of the major indexes down approximately -1.25% or more. A better than expected Producer Price Index (PPI) report showed inflation declining by -0.5% m/m vs. the consensus for -0.1%. On a y/y basis, it came in at 6.2% vs. last month's 7.4% and views for 6.8%. The core rate (ex-food & energy), was up 0.1% m/m, which was in line with expectations, while the y/y change was up 5.5% vs. last month's 6.2% and estimates for 5.6%. Stocks were up earlier in the day on the news. But disappointing Retail Sales, which dropped more than expected at -1.1% m/m vs. views for -0.8%, weighed on prices. So did the Industrial Production numbers which were down -0.7% m/m vs. the consensus for -0.1%. Manufacturing Output was also down more than expected at -1.3% m/m vs. views for -0.2%. Last month's report was also revised lower, painting a weaker than expected picture for the last two months. MBA Mortgage Applications rose 27.9% w/w, with purchases up 24.7% and refi's up 34.2%. But with purchase volume down by -35% y/y, and refi's down by -81% y/y, the weekly bump had a muted impact. The Housing Market Index rose to 35 from last month's 31 and estimates for the same. But like mortgage apps, the index is down -58% vs. the same time last year. Business Inventories were up 0.4% m/m as expected. Yesterday's comments by Federal Reserve Bank of St. Louis President James Bullard didn't help matters when he said he thought the Fed should raise rates by 50 basis points at the next meeting, which concludes on 2/1, and keep going until they hit a midpoint of approximately 5.38%. The market has been widely expecting only a 25 bps move when they next meet in two weeks, with an ultimate terminal rate of around 5.1%. For the record, Mr. Bullard is a hawk, and he regularly calls for tighter policy than what gets voted for. Nonetheless, it does show where his mind is at. And possibly others as well. Today we'll get another look at the economy with Weekly Jobless Claims, the Housing Starts and Permits report, and the Philadelphia Fed Manufacturing Index. We'll also get more earnings with big names like Procter & Gamble and Netflix on deck. All in all, we'll get another 53 companies reporting today. In spite of yesterday's pullback, the S&P is up a solid 2.33% so far this year. The Nasdaq is up 4.69%. And the small-cap Russell 2000 is up 5.29%. That's a marked difference vs. how last year got started, not to mention how it ended. And history shows a high probability of outsized gains following a down year for the market. Then add in the favorable seasonal tendency which shows that year 3 of the 4-year Presidential cycle (that's 2023), is the best year of all 4 years (since 1950, stocks have always gone up in the year after midterms, with an average 12-month forward return of 18.6%), and the odds of success this year look pretty good. I doubt the market will be a cakewalk this year. And I expect there to be distinct winners and losers. But for those who know what to look for, that could be the difference between a gain and a loss. To read more about how to put the probabilities of success in your favor this year, be sure to read our latest commentary... [A Tale of Two Investors, Which One Are You?]( Best, [Kevin Matras - Signature] Kevin Matras Executive Vice President, Zacks Investment Research [Get Your Free Copy of Finding #1 Stocks - A $49.95 Value]( Starting today, you can claim a free copy of Finding #1 Stocks by Zacks' EVP Kevin Matras. You don't even have to pay for shipping! 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