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Another hot reading of inflation kept the bulls pinned to the ground Tuesday. All eyes now are on tomorrow's conclusion of the Federal Reserve's latest policy meeting, where America's central bank is expected to raise its benchmark interest rate once more.
The Bureau of Labor Statistics reported this morning that U.S. producer prices rocketed 10.8% year-over-year (and 0.8% month-over-month) in May, driven in large part by high energy prices. That was a higher MoM rate than April's revised 0.4%, and roughly around economist expectations.
"This report adds to evidence of price pressures remaining elevated across the board, suggesting more near-term inflation," says Barclays economist Pooja Sriram.
In other words, there's nothing to suggest that the Federal Reserve will back off from its projection that it will raise the Fed funds rate by another 50 basis points on Wednesday. In fact, Wall Street is increasingly betting they'll go farther.
"The Fed is suggesting that they are willing to induce a recession to prevent the inflation surge," says Gene Goldman, chief investment officer of Cetera Investment Management. "The CPI and PPI reports will make the Fed raise rates more than markets had anticipated just last week [75 basis points instead of 50]. This is analogous to the Fed ripping off the band-aid and raising rates fast upfront (instead of slowly pulling it off)."
Goldman adds, however, that the key thing to watch is the terminal rate – while the Fed might get more aggressive now, it also might end up raising rates by less later in the rate-hiking cycle.
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The S&P 500 dug a little deeper into bear-market territory, declining 0.4% to 3,735, while the Dow Jones Industrial Average was off 0.5% to 30,364. The Nasdaq Composite actually managed to finish in positive territory, with a modest 0.2% gain to 10,828.
Oracle (ORCL, +10.4%) was one of the trading session's brightest spots, as the enterprise software firm easily topped quarterly profit estimates and delivered better-than-expected guidance for its upcoming fiscal year.
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Other news in the stock market today:
"It's better to miss the bottom of a market and buy on the way up than to guess where the exact bottom is."
So says George Ball, chairman of investment firm Sanders Morris Harris, who adds that "new money should be patient money" now that investment psychology has decidedly shifted to the negative side of things.
We've recently sounded off on our picks – both stocks and exchange-traded funds (ETFs) alike – for investors buying in a bear market.
Sanders weighs in too, saying "there are opportunities right now in low volatility and high-dividend-yielding stocks that shouldn't fall much further, regardless of the trajectory of the overall indexes," and adding that "master limited partnerships (MLPs) are the types of securities that offer stability during times of market duress."
But today, we also want to look back on yesterday's official end of the two-year-plus bull market. While the COVID recovery run was best-known for highflying work-from-home names, surprisingly, those weren't the stocks that ended up on top at the bull market's end. Read on as we take a brief look at the top performers between the depths of the COVID pandemic and the bull's final breath in 2022.
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