Day Traders Diary

2/15/23

The major averages are lower to start the day as investors mulled the latest retail sales report, which came in higher than expected, after the release of January's hotter-than-anticipated consumer price index Tuesday. The Dow Jones Industrial Average is down 150 points to start the day. The S&P 500 is down 13 points or 0.33% while the Nasdaq is lower by 11 points.

The January retails sales number came in higher than expected, jumping 3% on the month where economists at Dow Jones anticipated a 1.9% increase. The number signals that the U.S. economy is holding up despite increased rate hikes by the Federal Reserve to tame inflation.

"The labor market's resilience is the main reason consumers continue to spend and as long as that's the case, inflation is likely to remain sticky," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance in a Wednesday note. "The Fed is going to need to raise rates higher – and hold them higher for longer – than people currently expect and this is going to cause markets to go through some significant volatility as stock and bond markets are priced for benign scenarios and not the more difficult one that we are headed towards."

The declines follow a choppy day of trading on Tuesday, when the Dow closed lower by more than 156 points. The S&P 500 remained relatively flat, dropping 0.03%, while the tech-heavy Nasdaq Composite shook off earlier losses to close 0.57% higher.

Tuesday's inflation report also weighed on equities. The January consumer price index report came slightly above economists' estimates, indicating a potentially longer path in the Federal Reserve's fight against rising prices and weighing . The CPI increased by 0.5% for the month and 6.4% from the prior year, compared to estimates of 0.4% monthly and 6.2% annually, according to Dow Jones' survey of economists.

Ed Yardeni, president of Yardeni Research, noted that while inflation remains above the Fed's target rate of 2%, the higher-than-expected numbers weren't entirely surprising.

"The inflation came in with expectations, and I think that's why the market took it in stride," he said on CNBC's "Closing Bell: Overtime." Commenting on the monthly uptick in inflation data, Yardeni added, "I think we're going to have some bumps along the road. But all in all, I think we are certainly seeing strong disinflation."

However, he added that despite anticipating a soft landing for the economy, he doesn't expect the Fed to cut interest rates this year.

Biogen and Kraft Heinz will be reporting their quarterly earnings on Wednesday before the bell.

Investors will also be looking toward the latest retail sales data to gauge consumer demand. The National Association of Home Builders/Wells Fargo Housing Market Index, industrial production and business inventories data will be released on Wednesday morning.