Higher oil prices, gains in the so-called FAANG stocks, and rising interest rates that benefited the financial sector were all touted as contributing factors to Wednesday's advance. They did indeed help, yet the real basis for Wednesday's advance was last week's successful hold by the S&P 500 of its 200-day moving average.
That key technical support level was tested last Thursday and the market has been trending higher ever since. In fact, the S&P 500 is up 4.0% from its May 3 intraday low (2594.62).
That's 4.0% in less than a week, which is quite a move and not entirely surprising in a range-bound market that rallies on the lows and retreats from the highs.
Wednesday's rally effort pushed the S&P 500 back above its 50-day moving average, which some consider to be an encouraging sign that more gains are in store for the market.
Naturally, we'll see what unfolds in due course, yet it is interesting to note that the market narrative has shifted in conjunction with this technically-driven rally. To be sure, that narrative will shift again if this rally loses steam.
Gone will be the optimism about earnings growth and back will be the concern about peak earnings growth. That fickle narrative is another hallmark of a range-bound market where the reason(s) for a prevailing move can easily be retrieved to explain any direction the market is heading from one day to the next -- or even one hour to the next.
To that end, the market wasn't doing much yesterday until about 11:00 a.m. ET. Up to that point, there was a subdued perspective on the action, with concerns about the decision to pull out of the Iran nuclear deal highlighted as a basis for the lack of buying conviction.
However, when the S&P 500 broke out of a sideways trading pattern around 12:00 ET, media sources went back to the well to retrieve "strong earnings," "reassuring PPI data" (which was out before yesterday's open), and "growing confidence that rising rates fit with a growing economy" to explain the breakout.
That's today's starting point, then, only substitute PPI data for CPI data, which we will get to momentarily. Right now, it is worthwhile to know that the S&P futures are up eight points and are trading 0.3% above fair value. The Nasdaq 100 futures are up 22 points and the Dow Jones Industrial Average futures are up 64 points.
Those indications were less positive before the Consumer Price Index (CPI) for April was released. They picked up, though, on the recognition that the CPI and core CPI headlines were weaker than expected, which helped temper concerns about the potential for the Fed to be more aggressive than expected. That is the key takeaway from the report.
Briefly, total CPI increased 0.2% (Briefing.com consensus +0.3%) while core CPI, which excludes food and energy, increased just 0.1% (Briefing.com consensus +0.2%).
The monthly readings left CPI up 2.5% year-over-year, versus 2.4% in March, and core CPI up 2.1%, which was unchanged from March. In other words, there wasn't a bothersome acceleration in the consumer inflation trend in April.
Separately, there was a redux in the initial claims report for the week ending May 5, as claims were unchanged at 211,000. Continuing claims for the week ending April 28 increased by 30,000 to 1.790 million, which is still an historically low level for that series.
Since there was no change in initial claims, it's fair to say that there was no change in the key takeaway from the report, which is that the low level of claims continues to underscore a condition of tightening supply in the labor market.
In other developments, the Bank of England voted 7-2 to keep its official bank rate unchanged at 0.50%; Qualcomm (QCOM) announced a $10 billion share buyback program; and Ford (F) said it is halting production of its F-150 pickup due to a fire at a supplier plant, but reaffirmed its FY18 adjusted EPS target of $1.45-$1.70.
There is other corporate news of course, yet it is mostly filler material for a market that is looking technically charged at the moment.