The lede from Reuters: The inflation bogeyman has reared its ugly head and sent U.S. stock investors racing for the hills in recent days.
More: Next week, coming off one of the most volatile stretches in years, two important readings on U.S. inflation could help determine whether the stock market begins to settle or if another bout of volatility is in store.
If the January’s U.S. consumer price index due next Wednesday from the U.S. Labor Department, and the producer price index the next day, come in higher than the market anticipates, brace for more selling and gyrations for stocks.
U.S. consumer prices rose 2.1 percent year-on-year in December and is forecast to stay around that pace this month.
Mr. Hogan ads some color: “This is how we started, go back to Friday and this is exactly where we were,” said Art Hogan, chief market strategist at B. Riley FBR in New York.
“The conversation about equity risk premium, interest rates and inflation, we are coming full circle.”
Here’s the kicker: But analysts also caution yields are not at levels that should be alarming to investors, and in fact are at levels that signal a healthier global economy, and the performance of some stocks this week points to a belief the consumer is also getting healthier.
The average yield on the 10-year Treasury note over the past 30 years is 4.834 percent, still well above current levels.
“Fundamentals are still positive, there is strong economic growth and strong earnings growth – those will help stocks move higher over time,” said Kate Warne, investment strategist at Edward Jones in St. Louis.
“But it doesn’t do much for predicting short-term moves.”
OK, got it…
Read the whole thing: www.reuters.com