Inflation Whiplash

Another hot CPI report this morning, with emphasis on gasoline and shelter prices, has doves running for cover as rates on the 10-Year push above 4.5%. An earlier dip-buy attempt in equities seemed initially convincing but has since sputtered. 

Overall, inflation looks to be staging another leg higher for a kind of whiplash effect off what many believed to be a soft landing last year into this early 2024.

Instead, regardless of what The Fed believes we have some highly rate-sensitive sectors, such as the regional banks in the KRE ETF and the REITs in the IYR, getting hit hard. Furthermore, the large banks kick off a new earnings season on Friday morning with JPM and WFC. 

On the XLF ETF for the larger banks, below on the daily chart, I am looking for even them to get hit after a uniquely steep rally since just before Halloween. 

Without question, bulls have enjoyed historical success in the Powell years of buying any and all dips and shrugging off virtually all conners when it comes to large cap tech leaders.

At a certain point, though, when the bond market does not play-ball with The Fed's wishes we reach a tipping point. And that continues to be the crux of the issue--Whether we are witnessing that tipping point play out in real-time after inflation clearly did not recede and, instead, is threatening another leg higher.