In what was probably its broadest rally in the New Year, if not through a good portion of 2017, the major market averages again powered to all-time highs. Volume was slightly higher on the NYSE but lower on the NASDAQ. Breadth was very strong as advancing stocks dominated 21 to 6 on the NYSE and 19 to 7 on the NASDAQ. Bonds rallied as a Chinese official scoffed at the report that they were curtailing their purchases of U.S. debt. We would also note that bonds have been selling off since mid-December, and a new leg down started at the beginning of the New Year as stocks have rallied, Therefore, this is prima facie evidence that even if money is indeed going to come out of bonds, as it already was before Wednesday's "fake news," it will likely find its way into stocks, as it already has.
Futures have reversed lower as the fourth quarter earnings season gets under way. Core CPI came in slightly above estimates (0.3% vs. est 0.2%) as shown below. New York Federal Reserve’s William Dudley said the U.S. central bank may have to “press harder on the brakes” at some point over the next few years, increasing the risk of a hard landing for the economy, as the inflation-obsessed Fed scrutinizes today's report on CPI prices. Dudley's concern is the Fed falls behind the inflation curve doing too little, too late.
Total CPI increased 0.1% vs. est +0.2% in December while core CPI, which excludes food and energy, rose 0.3% vs. est +0.2%. On a year-over-year basis, total CPI is up 2.1% (from 2.2% in November) and core CPI is up 1.8% (from 1.7% in November).
Separately, December retail sales increased 0.4% matching estimates. The prior month's increase was revised to 0.9% from 0.8%. Excluding autos, retail sales increased 0.4% in December also matching estimates. The prior month's increase was revised to 1.3% from 1.0%.
Focus List Notes:Most names remain extended. As we move into earnings season over the next few weeks, the wheat will likely be separated from the chaff.
Coherent (COHR) held support at its 50-dma, and remains in a lower-risk entry position using the 50-dma as a selling guide.
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