Day Traders Diary

2/16/23

The major averages are sharply lower as traders digested another hot inflation report along with jobless claims showing the economy is holding up amid the Federal Reserve's rate hikes. The Dow Jones Industrial Average shed 277 points, or 0.81%. The S&P 500 is down 46 points while the Nasdaq is down 175 points or 1.39%.

Stock future slid further after January's producer price index, another inflation measure, rose 0.7% on the month while economists surveyed by Dow Jones expected a 0.4% increase. Initial jobless claims unexpectedly fell for the week ending February 11, per a Labor Department report.

The new data comes after January's consumer price index and retail sales report were both higher than expected, suggesting that the Federal Reserve may have further to go in its efforts to tame inflation.

"Both inflation readings this week point to the stickiness of inflation and that the fight isn't over, especially when considering today's PPI reading was the highest month-over-month increase since early summer<′ said Mike Loewengart, head of model portfolio construction at Morgan Stanley.

Loewengart added that declining jobless claims suggest the labor market remains tight.

"It shouldn't be a surprise to see the market take a breather as hopes of a dovish Fed in the coming months fade," he said. "Bottom line is investors should recognize inflation may not return to normal levels as quick as many hope, and with that may come more volatility."

Still, markets have remained resilient. On Wednesday, the Dow Jones Industrial Average rose 38.78 points, or 0.11%, and the S&P 500 climbed 0.28%. Meanwhile, the Nasdaq Composite

 notched its third straight day of gains, rising 0.92%.

For some market observers, that suggested stocks could have more room to run from here — even after their strong start to the year.

"It looks like this rally does have some legs, and you can't fight some of the tape right now," Victoria Greene, chief investment officer at G Squared Private Wealth, said Wednesday on CNBC's "Closing Bell: Overtime."

"The Fed is saying that they're going to be hawkish, but the technicals are saying this rally is in, and I really don't think we're going to retest those October lows anymore, because we've hit some really important technical supports," Greene said.