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Market's See-Saw Action Continues

The market’s see-saw action continues, with the major indexes expected to start today’s session modestly in the red, apparently in solidarity with the pullback in oil prices. It is hard to make sense of the market’s day-to-day movements under any circumstances, but reading too much into the daily market action these days is particularly hazardous.
 
On the data front, we got a couple of positive retail sector earnings reports, while this morning’s inflation reading was a tad on the elevated side. The April CPI inflation reading came in a bit hot, with a bigger-than-expected rise in the ‘headline’ reading on the back of recent momentum in energy prices.
 
The ‘core’ measure that excludes the impact of food and energy came in-line with estimates, with the year-over-year ‘core’ gain coming in again above the +2% level at +2.1%. This follows the +2.2% reading in March and February’s multi-year high of +2.3%. We know that inflation hasn’t been a worry for the Fed lately in its monetary policy calculation, but these elevated readings are putting this measure back in the Fed discourse.
 
On the earnings front, the focus lately has been on the retail sector with a number of department stores coming short of estimates, though TJX Companies (TJX) surprisingly bucked that trend. Also reporting better-than-expected results this morning is Home Depot (HD), which beat estimates and raised guidance.
 
The strengthening fundamentals of the U.S. housing market are providing a providing a helpful tailwind for Home Depot and Loews (LOW). We saw this favorable momentum in the May homebuilder sentiment index on Monday and the April Housing Starts numbers. The Starts numbers came in a shade lighter than expected, but nevertheless represent positive momentum in the data.

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