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A Week of Good News!

By:JJ Kinahan

Weaker inflation and earnings optimism push stocks higher

  • Inflation fighting seems to be working.
  • Amazon's Prime Day succeeded.
  • JP Morgan earnings beat expectations.

The stock market has experienced a robust week, driven by encouraging inflation data and high hopes for a strong earnings season.

Major indexes, including the S&P 500 and Nasdaq Composite, recorded significant gains. As we enter the earnings season, investors eagerly anticipate the financial results of companies to determine the market's future trajectory.

Good news on inflation

Recent reports on the consumer price index (CPI) and the producer price index (PPI) revealed slower-than-expected inflation growth, suggesting that efforts to contain inflation have been effective. This positive outlook was further supported by the flattening yield curve, although it remains inverted.

Additionally, indicators like gas prices, airfare and used car prices have shown signs of cooling, indicating a potential easing of inflationary pressures.

Winning stocks

Several individual stocks have made headlines this week. Amazon's (AMZN) shares surged by almost 4% following the company's highly successful Prime Day sale, demonstrating continued strength in consumer spending.

Disney (DIS) experienced a slight increase after news of an extension of Bob Iger's tenure and the possibility of seeking strategic partnerships for ESPN and their legacy TV networks.

Google's parent company, Alphabet (GOOGL) witnessed a 5% rise with the expansion of its AI chatbot, Bard, into new markets in Europe and Brazil.

Solid earnings

Positive market sentiment was bolstered by better-than-expected earnings from JP Morgan (JPM), Wells Fargo (WFC) and United Health Group (UNH).

Jamie Dimon, CEO of JP Morgan, emphasized the economy's resilience and consumers' continued spending, albeit at a slightly slower pace.

A notable event impacting digital assets was a favorable ruling for Ripple in a U.S. District Court in New York, resulting in increased prices for digital assets. The decision deemed Ripple's XRP tokens sold on exchanges not to be investment contracts, marking a significant victory for Ripple in the crypto space.

Additionally, the VIX (volatility index) remains at levels not seen since the beginning of 2020, indicating a lack of market concern. However, it is important to note that complacency can make markets vulnerable to unexpected news.

While stocks have made significant gains driven by positive inflation data and optimistic earnings expectations, investors should remain cautious of potential volatility catalysts in the coming week, especially as prominent companies like Netflix (NFLX) and Tesla (TSLA) report their earnings. Staying committed to long-term investment plans and objectives remains crucial to navigating the evolving market landscape.

JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee.

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

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