At times this week, not even a crystal ball into the economy would’ve helped foretell the stock market’s return. Red-hot consumer prices? Stocks rallied violently, adding 5 per cent in a flash.
Ironically, the seventh down week in nine for equities will be remembered for its single green day, Thursday, when investors somehow shook off another disastrous consumer price index and bid up nearly every company in the S&P 500. The rally was a nearly unprecedented reversal when measured by second-to-second volume -- and faded as quickly as it came, when a report Friday showed year-ahead inflation expectations rose among consumers for the first time in seven months.
Violent reversals this week -- up 2.6 per cent one day, down 2.4 per cent the next -- highlight the challenge of assessing reactions among investors whose obsession with inflation data and Federal Reserve reactions to them only seems to grow. The S&P 500 notched a 194-point down-to-up reversal on Thursday as data showed that core inflation posted a 6.6 per cent jump from a year ago, the largest in four decades.
The Friday slump quieted market pundits who spent the previous day speculating on what caused such a jarring turnaround which, according to Sundial Capital Research data, was the fifth-biggest in the S&P 500’s history. It came after the gauge erased half its climb from 2020’s pandemic low, a hit to wealth that to some could have signaled that the Fed’s fight against inflation may be over at some point soon.
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